The phrase "castle in the air" is often used to describe a fabulous daydream that someone's having about a fantastic future. The castles people fantasize about aren't based in reality. After all, they're in the air. In fact, that's the point: they're desirable and unreal, and so they're super fun to imagine.
In The Phantom Tollbooth, though, at least one castle in the air is real. The book's Castle in the Air is where Rhyme and Reason are imprisoned after they're exiled from Wisdom. As a castle, it's a fitting place for royalty to live, and it floats about the Mountains of Ignorance, a tremendous distance in the air.
But be careful: like other objects in the Lands Beyond, the Castle is more than what it seems. The Humbug thinks it's glorious and pleasant, for example, but the princesses remind him that it's been converted into a jail: "no matter how beautiful it seems, it's still nothing but a prison" (18.78). So what is Norton Juster trying to tell us? That we should daydream? That fantasies are prisons?
We're pretty sure that's not the takeaway here. More likely, Juster is (as he always does) trying to make sure we look at things from all different angles. Sure, daydreams are fun, but when they become a reality, they lose some of their sparkle and wonder. What do you think?