The Spirit Realm is a realm, inhabited by benevolent and malevolent spirts. While indepedent from the normal world, both the spirit world and the natural world are in constant interaction, yet not easily accessible. That said idea has inspired multiple fiction works, including the television series Avatar: The Legend of Korra, and Jackie Chan Adventures, where the spirit realm appears as one of the efficient locations of each respective series. It's access is granted by portals, builted to interact between the normal world and the spirit world.
Regarding the villain tournaments, the Spirit Realm appears as one of the supernatual planes of existence, alongside with Hell, Limbo, and the Netherworld, with the use from The Legend of Korra and Jackie Chan Adventures, being used to represent it's existence.