Hell in Supernatural, is the place or punishment and pain of the afterlife. Human souls who are sent to Hell are tormented until their humanity is stripped away and they become demons (3.09 Malleus Maleficarum).
Dean spends four months in Earth time in hell, but he reports that time passes differently there, and for him it was more like forty years (4.10 Heaven And Hell. This makes 3 days on earth roughly equivelant to a year in hell.
During his time in Hell, Dean was tortured and each 'day' his wounds would be healed, and Alistair would offer to stop it, if dean would become a torturer of souls himself. After '30 years' in hell (or 3 months on Earth) Dean accepted the offer and started torturing souls.
Some demons appear to be able to move freely between Hell and the mortal realm eg Azazel,Alistair. Others are trapped and can only escape through portals such as Devil's gates.
When a demon is exorcised, it returns to hell whereas the Colt and Ruby's Knife kills, as in obliterates, the demon and the victim.
Dean: I enjoyed it, Sam. they took me off the rack, and I tortured souls, and I liked it. All those years; all that pain. Finally getting to deal some out yourself...I didn't care who they put in front of me, because that pain I felt, that just slipped away. No matter how many people I save, I can't change that. I can't fill this hole. Not ever.
You know when people want to describe the worse possible thing? They say it's like hell...You know there's a reason for that. Hell is like, um, well, it's like hell. Even for demons. It's a prison, made of bone and flesh and blood and fear; And you sent me back there.
Meg!Demon in 2.14 Born Under a Bad Sign
I saw Hellraiser, I get the gist.
Ruby: Actually, they got it pretty right, except for all the custom leather.
3.09 Malleus Maleficarum
4.11 Family Remains