Camelot was the domain of the mythical human ruler, King Arthur. (PROSE: The Creation of Camelot) According to some accounts, they were mere fiction in the Doctor's universe but actually existed in another world. It seemed to connect to the 20th century of the Doctor's native universe in Carbury near Lake Vortigern, in rural England, via an interstitial vortex.
Upon coming acrosses knights of Camelot who wielded energy weapons, the Seventh Doctor guessed that this Camelot belonged to an alternate Earth where advanced technology developed alongside magic. For example, Ancelyn told Brigadier Winifred Bambera that cars did not exist on Arthur's world. However, flying machines called ornithopters were used as transport. (PROSE: One Fateful Knight, TV: Battlefield) According to some accounts, he was correct; one claimed that, unlike other alternative timelines, Arthur's world was a natural alternative that had sprung from the universe, (PROSE: No Future) while according to another, it was one of many alternate timeline versions of Camelot created by the Guardian of Magic from the Druse as she reset her "game" with the Guardian of Might over and over. (PROSE: Legends of Camelot)
However, according to other accounts, Camelot was part of England's history in the Doctor's own universe. (PROSE: The Creation of Camelot, One Fateful Knight, A Honeycomb of Souls) Upon returning to Camelot and becoming Merlin, the Eighth Doctor realised that his earlier guess about alternate timelines had been wrong: King Arthur's knights wielded advanced technology because it had been gifted to them by an earlier self-declared "Merlin", actually a Renegade Time Lord who wished to sow chaos in Earth's causal nexus. (PROSE: One Fateful Knight)
In one final account, at least within the Starless World, which was an alternate timeline on the verge of collapse, Camelot was indeed a real kingdom, but located in Wales, not England. Here, Rory Williams served alongside Sir Lancelot as one of King Arthur's faithful knights. Sir Lancelot had a crush on Rory. (AUDIO: The Once and Future Nurse)
Merlin succeeded in overtaking Arthur, becoming the ruler of Camelot for a short time, but was ultimately thwarted by Rory, the Champion of Camelot, who named Guinevere as Arthur's successor. (AUDIO: The Last King of Camelot)
Behind the scenes
Camelot being located in Wales is not a throwaway reference. Most historians agree that the Matter of Britain, containing the original Arthurian legends, has Welsh origins.