We know very little about the Celestial Nursery. According to Mischief, it is the place "where realities are born". It can be assumed that the Nursery exists somewhere in the Cosmos, most likely far from the mortal realms. Its location is most likely a closely guarded secret, known only by the Interdimensional Council and the extradimensional entities who act as guardians of the mortal realms.
The Nursery consists of rows upon rows of "protoverses", each resembling a man-sized gem. (Whether this representation is accurate or not could be debatable; the gem representation may vary depending on the experiences and preferences of the mortal observing them.) The overwhelming majority of protoverses wink in and out of existence, rarely amounting to more than a fleeting opportunity never taken. However, every so often a protoverse coalesces, eventually evolving into a full-blown universe supposedly filled with innumerable mortal worlds. Exactly how this process occurs is unknown, perhaps even to the extradimensional entities themselves.
Mischief brought Todd to the Nursery in an attempt to resurrect the Gamester after his deadly confrontation with Pandemonium. Apparently, if an injured extradimensional entity is placed within a fledgling protoverse, he or she can absorb its energy and regenerate. The process destroys the protoverse, eliminating all possibility that it might evolve into a full universe. Much to the pair's dismay, the remains Mischief placed into the protoverse were not the Gamester's but Pandemonium's. The evil entity attacked and injured Mischief, leaving Todd in the Nursery with no means of escape.