Players can choose what their worlds look like and what the basic principles of their realities are - or everyone starts with the same general space (e.g., 2D geometric forms) and they are free to evolve (cartoon-like world, highly realistic, going in an abstract mathematical direction, etc.). When players interact, they only percieve the others world as much as the rules of their realities allow it.
There are different on-screen examples of alternate worlds, such as Into the Spiderverse, Doctor Strange and the Multiverse of Madness, Inside Out, but my favourite is the one described in the 3rd book of Liu Cixin's Three Body Problem trilogy, when the protagonists stumble into a "4D bubble", and they try to make sense of it (and later we learn that, in the beginning, the universe had 11 dimensions)