A large portion of this book happens in places that aren't real. That makes for some pretty neat descriptions and fantastical happenings. What's cool, though, is that even this crazy setting is grounded in reality. So we'll start with the reality.
Coraline is set in England (makes sense, since Neil Gaiman is British) which explains some of the slang we get. We never learn exactly what town or city Coraline lives in, but her dad takes a trip to London at one point in the story, so we know we're in the real world here.
The apartment, or flat, that her parents rent is part of a large old house that seems to be out in the country:
It was a very old house – it had an attic under the roof and a cellar under the ground and an overgrown garden with huge trees in it. (1.2)
The house itself is the main setting for the story, and it's not exactly a thrill: there's a well and some space to explore, but it doesn't have much to offer. Everything seems to be rusty, holey, and generally creepy. Speaking of which, how about that other world?
We aren't really surprised that this old, creepy house turns out to be a portal to another, even creepier world. The other world that Coraline visits is a lot like Alice's Wonderland: it's bizarre and fun and also pretty scary. Everything seems just a little bit off in the other world. For instance, Coraline describes the trees on the edge of the property; they're like trees, but not exactly:
Pretty soon they seemed very approximate, like the idea of trees; a grayish-brown trunk below, a greenish splodge of something that might have been leaves above. (6.30)
Throughout the story, we get a lot of really vivid descriptions of the other world. In fact, the other world almost becomes its own character, one that seems to mimic the character of the other mother. The landscape changes and slowly starts to fall apart as Coraline challenges the other mother:
Outside, the world had become a formless, swirling mist with no shapes or shadows behind it, while the house itself seemed to have twisted and stretched. (9.1)
Basically, as the beldam starts to freak out, so does the other world.
One last thing. How neat is the contrast between Coraline's own world and the other world that happens in the last chapter of the book? When Coraline returns home, everything is suddenly vivid and pretty. Coraline's relief helps her see her new home in a better light.
The sky was a robin's-egg blue, and Coraline could see trees and, beyond the trees, green hills, which faded on the horizon into purples and grays. The sky had never seemed so sky, the world had never seemed so world. (11.59)
The best part about her actual home is that it's real. We sometimes take that for granted.