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 Alastair 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. According to Alastair John spent some time in Hell, this was reveled in 4.16 On The Head Of A Pin. Alastair also made the same offer to John that he made for Dean, John took the pain and the torture for 100 years and then he finally gave into Alastair’s offer. Some demons appear to be able to move freely between Hell and the mortal realm eg Azazel, Alastair. Others are trapped and can only escape through portals such as Devil's gates.