The Demon Realm, or demon dimension, was a plane of existence within the reality of Nosgoth. It was a surreal, shadowy dimension, coterminous with the Material Realm and the Spectral Realm, and the native habitat of the demons.
At the close of the vampire-Hylden war, the Ancient Vampires magically banished the Hylden race there, erecting the Pillars of Nosgoth to sustain this Binding. Chaotic and ethereal, the Demon Realm was regarded by these post-banishment Hylden as a hated "place of evil", one which they suggested rendered its inhabitants "hideous" and "mad".
Unlike the Material and Spectral Realms, the physical laws unique to the Demon Realm have been largely unexplored. Though it was first referred to indirectly as one of many "other realms" in Blood Omen: Legacy of Kain, its role in Nosgoth's mythology was not significantly expanded upon until Soul Reaver 2, Blood Omen 2 and Legacy of Kain: Defiance.
The Demon Realm's first appearance was in Blood Omen: Legacy of Kain, when Kain was killed and Mortanius ressurected him as a vampire, it made an second appearance in Legacy of Kain: Defiance, from Kain's point-of-view; Turel's Pit within Avernus Cathedral is the only area depicted in this plane. Aesthetically, it is portrayed as a warped, nightmarish reflection of the Material Realm, with heavy light bloom, the Spectral Realm's movement blur effects and thick hazes of bright, fluorescent mist rolling through the atmosphere. The Pit's geometry is sharply distorted out of shape in comparison to its Material Realm incarnation, and pulsing red cracks and seams exist in the earth which are not present in either of the other two parallel dimensions. The Demon realm is likely the "hell" of Nosgoth while the Spectral realm being the "heaven".
The realm's physical laws regarding time and water are not explained in depth, but Kain - a Material being - was able to wield the Blood Reaver and drink from blood basins as he ordinarily would. Gravity functioned as normal, and the demons Kain battled did not avail of any special powers besides teleportation. Several disembodied Hylden voices taunted Kain through the ether, remarking that he was still "fair of form" and that "that will go first"; they assured him that "this realm will render you hideous". Judging from the various Hylden's comments, it seemed that the natural forces of the Demon Realm had a gradual, yet direct, negative or distorting effect on the mental health and physical composition of its denizens.