Yu-Shan is a pocket dimension comprising a city the size of the Blessed Isle; Yu-Shan is the exact size of the Blessed Isle and follows the Isle's contours exactly. Yu-Shan is a completely enclosed environment, surrounded by walls on all sides and enclosed with a dome-like roof; the configuration of the sky is a function of whomever is currently winning the Games of Divinity. If the Unconquered Sun is winning, it is day. If Luna or one of the Five Maidens is winning, it is night (with either the moon or the appropriate planet shining in the sky).
In the Age of Sorrows, Yu-Shan is in decay. The celestial palaces are rotting, the bureaucracy is increasingly corrupt, and the highest Gods are too absorbed in the Games of Divinity to pay attention to the damage. Yu-Shan is basically kept running by the Sidereal Exalted and that small fraction of Gods still dedicated to their tasks. Only two of the Gods (the Maiden of Secrets and Lytek, the God of Exaltation) are even aware of the Great Curse that afflicts their Exalted, and the Celestial Incarna seem oblivious to the fact that the Dragon-Blooded have outlawed their worship within the Realm.