Termina is a warped reflection of the world of Hyrule that serves as the afterlife for all intelligent beings of Hyrule, and all "natives" of Termina are warped parallels of what they were in life. It is also the prison of the Druthulidi Majora. Termina is one of the main settings of Hyrule Conquest and its expansions, the other ones being Hyrule, the planet created by the Goddesses and basis of Termina, and the Realm of Twilight, another world in Hyrule's cosmology.
Oocca propaganda tells that Termina was discovered by Majora shortly after the creation of Hyrule when it arrived at the world, evidently in an attempt to mimic the Goddesses' act of creation. Enraged at the perverted version of their world, the Goddesses trapped Majora within its parallel world, threatening it with death should he ever directly manifest in Hyrule again. All of Majora's mortal worshipers were likewise trapped within the plane, doomed to repeat the 3 worst days of their lives for all eternity. In retaliation, Majora called its Druthulidi kin to Hyrule and set about twisting the creations of the Goddesses against their will.
In truth, Termina was created by the Goddesses themselves, as a place of afterlife for all mortal beings of Hyrule. After arriving in Hyrule, Majora took over Termina and warped it to his own will. It is unknown what were the circumstances of his entrapment.
Great Sea War
In 4962 BG, Majora successfully tempted King Igos du Ikana into inciting a 3-day civil war that tore apart the Kingdom of Ikana. Upon the conclusion, almost every Ikanian lay dead, and Majora absorbed the Kingdom and its Garo vassals into Termina. They would be doomed to repeat they same three days of civil war for almost 5000 years.
Termina more or less appears different for each individual, with only certain things remaining the same. A lot of the people a person meets in Termina appear as people he or she has known in life, hence why Romani looks like Malon for Link, while Ganondorf would probably witness a lot of Gerudo he knew in life. Fictional characters people knew could also manifest. Physical laws are more or less as an individual would know them in Hyrule, though they may be warped, such as a cycle of the three same days repeating over and over endlessly.
Beings who died in Hyrule and were "born" into their afterlife in Termina.
Beings absorbed into Termina before they died from Hyrule or other worlds by Majora.