The world of the Aesir is far above Midgard, where we dwell.
In addition to the gods, their cousins the Vanir inhabit it,
as do the light elves.
Beautiful Asgard was fashioned by the sons of Bor, the first gods, Odin, Vili, and Ve. Heimdall, who needs less sleep than a bird, whose ears can hear a sheep's wool growing, watches over its three-colored rainbow bridge, Bifrost, lest those who have business with the gods should approach their fortress.
The crown of the World-Tree Yggdrasil stretches above Asgard, and through the lands below, and beyond. It suffers from the creatures whom it sustains. Where its roots touch Asgard is the Well of Urd, of Fate, where the three sisters gather to weave our destinies - for no one's fate exists independently of others'. I suspect that it is a lovely tapestry indeed, though we are shown but the barest glimpses of it.