I think it is an intersection between the real world and something more supernatural. Like maybe it's a real place but some angels or spirits or something "other" used it as a portal.
It had a very surreal atmosphere, but when 3 different people all see the same thing I have to assume it was at least somewhat real. Maybe it's like the village in Brigadoon- it can appear and disappear. Or like the town in "Big Fish". Which also has Ewan in it, and is sort of about the stories we are told.
Did you also notice the beginning was different, when it said "this is a true story", it showed the words one at a time instead of the whole sentence, and then they fade away to just leave "story".
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