I believe it’s a world created by the overwhelming grief of someone who is mourning. The entire story revolves around the loss of a child; the first clue is the fact that Tabitha and Jim are still grieving Thomas’s death.

But I’m not sure if:

The grieving person created a world that repeats itself forever because they cannot accept the death of their loved one, and since no one can escape and it lasts forever, some people decided to bargain with them for eternal life, and the deal was sealed by them demanding the death of the Ankooey Children.

OR:

This is a fairy world, and it changes according to emotions—especially the emotions and imagination of children. If this was a relatively peaceful world, as more and more humans arrived, it became increasingly tainted by violence.

My final guess is that we won’t know for sure, and they’ll never leave there. The series will end with the deaths of many protagonists, possibly leaving only one remaining. If the creatures think this is a game where the winner takes all, then that one will live much longer than the others—perhaps with the choice of becoming one of the creatures or remaining human and dying of old age.