I'm going to be up front here that this is basically a neophyte's breakdown of what will basically be a chapter in the upcoming Van Richten's Guide to Ravenloft. It's the most excited I've been about a D&D book in a while (I'm a bit torn, because the collector side of me want to get the limited edition, which my local store only charges 5 bucks extra for, but I think I might like the art of the standard cover better) and I've been thinking a lot about the possibility of running a Ravenloft campaign (though one that I think I'd make pointedly limited in scope, maybe having it only run to level 10 or 11.)
Ravenloft is built out of many different miniature worlds - regions like Barovia, Falkovnia, Dementlieu, etc. are all partitioned off by the Mists. In previous editions, there was a sort of "continent" that connected the various realms, so that if you found a way to traverse the mists, you could step into another domain. On one hand, this opened the possibility for the various domains to war against one another, and set up figures like Strahd and Azalin as rivals for supremacy over their miserable world.
On the other hand, I think that this continent, known as The Core, pushes the setting to be a little too much like other fantasy settings. WotC has announced that in 5th Edition, the Core is shattered, and each domain is an island adrift in the mists, which I think is thematically a lot more appropriate (though it also doesn't bar any interactions between domains.)
I think it is important to the Ravenloft setting that you are not in the Prime Material Plane. While its presence in either the Ethereal Plane or the Shadowfell does mean it's in one of the Inner Planes, which tend to have a more familiar relationship to things like space and distance, the fact that you're not in the mundane, physical world means that things don't have to behave in entirely realistic ways.
The Dark Powers, mysterious and unseen beings that make the Domains of Dread function, are essentially the intelligence of the Ravenloft setting - the land itself is aware and thinking, and it wants to scare you.
The alignment, per se, of the Dark Powers is an enigma. On one hand, you could see the Domains of Dread as a prison for the material plane's worst monsters, sealing them away so that they cannot continue to harm their home worlds. This could make the Dark Powers seem like good guys. But on the other hand, the way that the Mists drag potentially innocent adventurers into their worlds, and those who are dragged along with the Dark Lords (the evildoers around whom the prisons are formed,) makes the Dark Powers seem at best callous in their lack of surgical precision.
In fact, it almost seems as if the motivation for trapping the Dark Lords is not to keep them from harming the worlds from which they are taken, but simply to torment them endlessly, which implies that the Dark Powers are vindictive and cruel at best, or worse, they might gain something out of the torment they cause.
So, how do we put together a domain?
I think there are two questions to consider to begin with. The first of these is what subgenre of horror you want to explore. Gothic Horror is the bedrock of Ravenloft, but many of the tropes of Gothic Horror have been remixed and reinterpreted to create subsequent subgenres, so it's worth looking at even if you want to do something more like Cosmic Horror or another variant.
Secondly, who is your darklord?
While the trappings of the genre will be very important for fleshing out the overall environment, and some of the themes you can play with, the darklord at the center of it all is key.
While some domains might have multiple darklords, you'll want to have at least one. We'll assume you have a single darklord, though they can have lieutenants and henchmen who can have their own interesting personality, so don't feel like you have to have just a single interesting villain.
The darklord must be monstrous in nature - physically dangerous to any ordinary person. Vampires are great for this, given that they are intelligent and mostly human-like, but robbed of the human traits necessary to be good, like empathy and humility. A darklord needs to be relatively intelligent - at least at a humanoid level of intelligence - because it needs to have had the knowledge to be responsible for the evil acts that got it trapped. A fiend, for example, isn't going to make for a great darklord because their evil is part of their nature, and not a choice made that the darklords would seek to punish. Again, intelligent undead in general work well in this case, because they have that vestige of humanoid free will, but have transformed in such a way to no longer be able to return to that humanity.
Humanoid villains also work here, for the same reasons, but you'll want to ensure they are empowered in some way - they have some magical ability, or some kind of mutation brought on by mad science, which has made them formidable (granted, you could run a purely tier 1 Ravenloft game, but even then, you'd want to have a villain who's at least scary enough to pose a threat to a group of level 1 players.)
But while the physical nature of the villain is important, the key is their personality. The nature of the Dark Powers' torment of their darklords is that the darklord is trapped in an endless quest that is always frustrated by failure. Strahd's quest is to find the reincarnation of his "beloved" Tatyana. But because he has mistaken obsession and a desire to possess her for love, even when he does find her, her attempts to escape lead to his killing her, beginning the cycle anew. Strahd blames himself for his failures, but not in an empathetic way that would cause him to stop this horrific pursuit, but only by considering his strategies and tactics for getting what he wants to be wrong.
Strahd is a compelling villain in part because he presents the illusion of having some sort of redeemable side. His brooding nature and his passions might trick you into thinking that there's a good person somewhere deep down. The truth is that he will never change, and will only manipulate and gaslight others into questioning his villainy. Strahd, more than anyone, is convinced by this trick, and that leads us to a good concept for any darklord: that they are the hero of their own story.
Really this is a good thing for any villain, as the vast majority of people don't think of themselves as bad guys, even as they commit evil acts. There's rationalization, delusion, or even just compartmentalization that they use to avoid any feeling of remorse that might lead them to change for the better. This is true for evil people in the real world, but Ravenloft heightens this to supernatural extremes. Strahd is a complete narcissist. To clarify what I mean by that, narcissism is not simply a self-adoration, but it's a kind of solipsistic worldview in which only the individual's desires, beliefs, and even sentience exist - all other people, in the narcissist's mind, exist solely in how they can serve the individual's needs. This can manifest with overwhelming praise and adulation for those who help them that can then turn, in an instant, to bitter hatred the moment someone does something that the individual doesn't want them to do.
Strahd, for instance, presents himself with an air of magnanimity, but if the players get in the way of his attempt to take Irina (the woman he believes is Tatyana's reincarnation) they become his nemesis.
So, to review: the darklord needs to be someone in a Sisyphean loop, which is how the domain persists, and their impossible task is the cause of most of the ongoing strife in their domain. Furthermore, they need to be powerful enough to keep the realm afraid of them and doom any attempt to overthrow them.
Next, let's talk about the realm itself:
Because Ravenloft's domains are focused around and built for the various darklords, the domain should reflect the darklord's personality. You can play with variants on the themes of their character flaws, having little microcosms of the cruelty that drew the Dark Powers' interests. Furthermore, you can also have some horror come out of the responses people take to the unassailable power fo the darklord.
In Barovia, there is, for example, a haunted ruin populated by the spirits of a group that opposed Strahd. There's also an area where a well-intentioned person has been constructing terrible monstrosities in an attempt to give Strahd a replacement for Tatyana that can survive his rages, hoping (vainly) that this will break the loop.
In Curse of Strahd, at least, they introduce a rather chilling concept: there is a small, finite number of souls to go around in the domains of dread. As such, most people you meet don't have souls. In many ways, they're examples of the philosophical zombie, which actually suggests that the darklord's narcissism isn't, actually, 100% wrong. However, unlike the philosophical zombie, the people without souls do seem different - disaffected, cold, and uncaring. Also, the souls that do exist within these realms are trapped there, which is why the same people (like Tatyana) keep getting reincarnated, forced into Strahd's Sisyphean loop over and over, only they're the boulder.
The isolated nature of the domain should make the place feel oppressive. Locals will treat the adventurers as interlopers, sure, but there's also a certain level on which they might treat the party as the new inmates at the prison. Cynicism and pessimism are likely the baseline mood for most people within one of these realms.
However, beyond that baseline, you can have a certain zeal that might arise. Locals within a domain might be loyal to the darklord, or they might just try to keep their heads down and engage in depressive behaviors like excessive drinking to try to escape their misery. But you can also get a lot of mileage out of a militant resistance to the darklord.
On one hand, you can use these as potential allies for the party, and I don't think it totally breaks the vibe of Ravenloft as long as they don't stand a chance (at least without the party) of actually overthrowing the darklord.
But another thing you might consider is that the actions of the darklord have spurred a rebellion that is just as dangerous. Real-world history has plenty of examples of religious hysteria and moral panic leading to evils greater than anything that inspired them in the first place. Thus, you can have a fiery inquisition is far too quick to execute people suspected of collaborating with the darklord. The party, being outsiders, could easily be mistaken for agents of the darklord, and have to fend off a zealous inquisition.
While this behavior could arise on its own, you could even have the Dark Powers stirring the pot to ensure that this kind of thing continues. Or, you could even have the darklord himself using this inquisition as a method to sew mistrust among their enemies.
I'm very curious to see how the new book outlines the steps needed to create a domain of dread. As someone who really prefers homebrewing stuff, I think that I'd be likely to do so if I run a Ravenloft campaign.