Netherealm

The Netherealm (or Netherrealm) is a realm in the Mortal Kombat series. This place can also be considered as what we would call Hell in the Abrahamic faiths. It seems to resemble an eternal volcanic "continent," containing many volcanoes and lava pits.

About 
Shujinko: "This place... it feels dark."

Damashi: "As dark as every heart that inhabits it. Your presence here would not be possible. Only evil resides in this realm."

Netherealm appears to be, like Outworld, a realm composed of thousands of different layers. In the Mortal Kombat universe, deceased souls or entities who have committed major crimes descend into the Netherealm to undergo endless torture. In fact, one cannot enter the Netherealm without being evil or have a soul tainted with evil. It is an alternative, more generic name for the Abrahamic concept of Hell, as one of its former rulers was Lucifer (whose name appears only in the Sub-Zero game manual but not in-game). It is also described as "the darkest region of reality", and is inhabited by demons, monsters, and beings of the purest evil.
Though exits from and entrances to the Netherealm are very limited for obvious reasons, the world had quite a tumultuous history. Millions of years ago, the fallen Elder God Shinnok was banished there. After ages of imprisonment, he was able to break free, deposing Lucifer in the process. He restructured the realm to bear some resemblance to Earthrealm, the world which he had long desired to make his own. He later used it as a staging ground for the invasion of Edenia, but found himself cast into the depths of the realm again after this invasion was foiled. The abandoned war machines of Shinnok were then put to good use by one of his former acolytes, Noob Saibot.
Two locations within this realm include the Bridge of Immortality and the Prison of Souls. These are almost like the Di Yu in Chinese Mythology. The Prison of Souls is the Chamber of Grinding and so is the Slaughterhouse. Shinnok's Spire resembles that of Yan Wang's spire in 'Journey to the West.'
In Mortal Kombat: Deception's Konquest mode, Shujinko arrives during the "Festival of Torture", in which dead bodies burn and inhabitants watch them.

Native realm species
In a generic sense, many demons and spectres are native to the Netherealm in that human beings can be transformed into them when their essences descend into hell, but it is unclear if Netherealm hosts any original life. It should also be noted that the inhabitants of this realm look more human than they are, because the realm's magical nature conceals their demonic nature. Once they leave the Netherealm, they may start to decompose and rot. Like Chaosrealm inhabitants, some Netherealmers tend to speak backwards.
A specific subset of demons, the Oni, is thought to be native to the Netherealm. They vary a lot in terms of appearance, stature and colour, as is evidenced by Drahmin and Moloch, and appear to be unable to communicate with other lifeforms. (Although in Armageddon's conquest mode Drahmin does state "Welcome to Hell." to Taven.) Their prime state of being appears to be one of unquenchable rage.
There are also seen dismembered humans, presumably from the Chamber of Dismembering.

Notable residents
Not born in the Netherealm 
Drahmin was once a warlord who was presumably assassinated, and transformed into a caricature of his former self by unknown powers, until he became an Oni. He may have been at the seventeenth level of Hell, seeing that he is somewhat eaten by maggotsor he might have been skinned in Hell as well.
Noob Saibot is the altered form of the elder Sub-Zero, after he was murdered by Scorpion in retribution for his own killing. The mass corruption in his soul caused him to transform into a humanoid Wraith based on his reincarnation in the next life as he is not in a very low level.
Reiko was originally introduced as a member of the Brotherhood of Shadow, presumably a demon as well. However, his exact origin is revealed as Outworld in his trading card video.
Scorpion became a vengeful specter in the Netherealm after he was killed by Noob Saibot (as Sub-Zero). Unlike most creatures in the Netherealm, Scorpion is neither evil nor good and can somewhat withstand the torturous realm better than others stating that he is not at a very low level in Hell. In fact, it has been stated that his powers increase there as of Deadly Alliance. His type of reincarnation is based on the Chinese belief that a dead person with unfinished business comes back to settle scores with opponents and can't be easily put to rest.
Shinnok was once an Elder God, descended into Netherealm because he wanted to take over Earthrealm without relinquishing his status as Elder God. However, he did overthrow Lucifer with Quan Chi's assistance and became supreme ruler of the dark realm as stated in the MK Mythologies manual but then, his side-story in Armageddon may retcon it otherwise. He is loosely based on the Chinese god of Hell Yan Wang and the Christian Satan, being deceptive and evil.
Smoke was brought to the Netherealm by Noob Saibot. It is suspected he has also become tainted with evil after his new master altered his nanotechnology.

Native or unknown
Quan Chi's origin is not known other than the fact that he used to be an Oni, but one of the Netherrealm's demons claims that Quan Chi is a demon from the Netherrealm and was a member of the Brotherhood of Shadows.
Ashrah's origins are unknown. Once an assassin in service of Quan Chi, she found a sword (Datusha) that slowly guided her to the light side.
Moloch is also an Oni, but unlike Drahmin, he is more ape-like than humanoid.
The Netherealm is also home to the Brotherhood of Shadow, led by Noob Saibot and Quan Chi.
Sareena is a demon of the realm, although little is known about her past. She was once a personal assassin of Quan Chi and served the Brotherhood of Shadow, but turned against the clan.
Kia and Jataaka were also demon assassins who served Quan Chi alongside Sareena. While they remained loyal to Quan Chi, Sareena did not.