The Spiritual Realm (also known as the Spirit World) is a non-existent place, usually inhabited by spirits of high power and mostly inaccessible to most people. The only way to access the Spiritual Realm is to bring yourself to the brink of death, or by harnessing the correct powers. It is almost identical to and often mistaken for the Dream World, whereas the two are very different.
Xena fought Alti in the spirit world twice: once in Siberia, in which instance she killed her. The second time was also in Siberia, to prevent her from gaining the soul of her unborn baby.
She also confronted Mephistopheles in the spiritual world, but was unable to kill him here, so she was forced to accept his offer in taking him to the surface world, where she did manage to kill him, but was then forced to take his place as the Royal Ruler of Hell.