The Netherworld has been the unseen place where ghosts reside since the beginning of The Sims games. Although it wasn't mentioned until The Sims 3, it is presumed to have existed since the series began.
In The Sims 3, once a ghost has become playable, the player has the option to return it to its unplayable state by selecting their tombstone which is located in the inventory and click "Return to the Netherworld."
There is a known glitch in The Sims 3 that when a ghost is out of the Netherworld, if the player uses the "MoveObjects" cheat and deletes the tombstone, the ghost will be trapped onto the mortal plane but cannot be cured with ambrosia. This is not recommended because this will cause the ghost to never be playable and cannot be changed back to human form (Even if the animation plays).
If there is a tombstone belonging to another Sim with the same name as the playable ghost, clicking on it may cause the "Return to the Netherworld" option to appear.
In The Sims 4, ghosts return and the Netherworld is mentioned again with the ability of other Sims being able to release the ghost into the Netherworld, removing the Sim from the game.