Gensokyou ("Land of Illusions" or "Land of Fantasy") is the fictional land in which the entire Touhou Project takes place. Its culture vaguely resembles that of feudal Japan, with a lot of folktale elements added on.
In the AWA fics, the land of Gensokyou under protection of the All Worlds Alliance.
Gensokyo was originally a desolate, haunted region of Japan ages ago. The youkai that lived there began to terrorize the surrounding lands, and thus powerful, heroic humans were sent to exorcise and exterminate them. The off and on battle between humans and youkai continued on until 1885 A.D., when Gensokyo was sealed off from this increasingly scientific and skeptical world with the creation of the Great Hakurei Barrier. There has been little contact between those societies ever since. Today, the only known gateway between Gensokyo and this world is the Hakurei Shrine, which stands in isolation along the border on distant mountains of the far east. It's known that the local language spoken in Gensokyo is modern Japanese.
Gensokyo is populated mainly by youkai, but a decent human and rabbit population lives there as well. Some of its inhabitants went there to hide, to escape, to find shelter when no-one and nowhere else would accept them. Many of them just like the natural darkness.
Gensokyo, the area encompassed by the Great Hakurei Barrier, is a landlocked territory comprised mainly of forested mountains. Notable geographic features include the Youkai Mountain with communities of kappa at its base, tengu at its peak, and the Moriya Shrine at a lake near the top; the Forest of Magic; the Bamboo Forest of the Lost where Eientei is located; the Misty Lake next to the Scarlet Devil Mansion; the Human Village and adjacent Myouren Temple, which are assumed to be in a fertile valley; the Sanzu River separating Gensokyo from Higan; and the Hakurei Shrine at the east of Gensokyo.
Although passing through the Hakurei Barrier to the Outside World is virtually impossible for anyone besides Yukari Yakumo, it's significantly easier for Gensokyo denizens to access domains of gods, demons, and spirits which aren't strictly part of Gensokyo itself. These include Higan, the Netherworld, Makai, Heaven, Senkai and the Underworld.
The fourth chapter of Cage in Lunatic Runagate reveals that the Youkai Mountain preserves the original appearance of Mount Yatsugatake before Konohana-Sakuyahime, the goddess of Mount Fuji, tore it down out of jealousy. In the outside world today, the remnants of the mountain can be seen as the Yatsugatake mountain range in Yatsugatake-Chūshin Kōgen Quasi-National Park between Nagano and Yamanashi Prefectures, providing a possible indication of where Gensokyo would be located in Japan. Lake Suwa (Suwa-ko) and Mount Moriya, which Suwako Moriya was named after, are located nearby.
Creatures of all shapes and sizes inhabit the world of Gensokyo, most drawing inspiration from Japanese legends and folklore.
Humans are one of the major populations in Gensokyo. Youkai essentially make up the rest, though "youkai" tends to be an umbrella term, and essentially can be used to encompass everything non-human. Many youkai are sub-classified into other races, such as devils, magicians, vampires, fairies, kappa, oni, and many more.
Many types of spirits also inhabit the world, such as Ghosts, Poltergeists, Evil spirits, Divine spirits, a number of Tsukumogami, and apparitions.
Many unusual items exist in Gensokyo, of which quite a few are based in Japanese mythology in one way or another. However, given Gensokyo's nature as a "land of that which is forgotten", even more modern items that have fallen out of style for a long time (such as the Game Boy) have occasionally turned up. Many of these "new" items appear near Muenzuka, and both Rinnosuke Morichika and Nazrin are said to have picked up various objects there.
In addition to the unusual items floating in, many goods are the same as those from old Japan. Goods like black tea and coffee are considered to be a luxury.
There are two known sources of media in Gensokyo: the Bunbunmaru Newspaper, written and edited by Aya Shameimaru; and the Kakashi Spirit News, by Hatate Himekaidou. The former seems to be far more popular, however, with its sometimes loose depictions of reality.
Gensokyo exists roughly parallel to the real world. There does, however, appear to be at least a few decades worth of a "time lag" between the two, as shown by hints and implications at major outside events happening. As the inhabitants of Gensokyo, however, have developed their spiritual lives instead of following the trend of technological advancements in the real world, Gensokyo itself can appear to be a Japan from hundreds of years ago.