Pockets of unreality were unstable bubble dimensions which could result from fractures in Time that had failed to heal. They could also be the temporal “ripples” of events past or future. (COMIC: The Silvering)
In 19th century Edinburgh, a magician known by the stage name of the Silversmith created a set of mirrors for his magic show, which, unbeknownst to the Silversmith, connected themselves to a pocket of unreality; the pocket in question contained Spherion crystals, which was how the portals had formed. As the pocket dimension developed in conjunction with the mirrors, it caused whoever was reflected in the mirror to see their reflection gaining a life of their own, thus creating the Mirror Folk.
The first member of this new race was the Mirror Silversmith, the reflection of the original Silversmith, who trapped his original inside the mirror world and worked to create new Mirror Folk. He captured dozens of humans using the Silversmith's magic show as a cover, simultaneously creating and releasing as many Mirror Folk and harvesting the prisoners' psychic energy using the Spherion crystals so as to stabilize and sustain the pocket dimension, which he fashioned into a Mirror Edinburgh, a twisted reflection of the original Earth city where everything was abstractly 'reversed' (such that where a theatre stood in the real Edinburgh, there was a jail in the Mirror version).
After the Eighth Doctor and his companion Josie Day freed the human prisoners, including the real Silversmith, the pocket of unreality collapsed into a white void that only encompassed the surface of the Silversmith's mirrors. The Doctor then used his sonic screwdriver to shatter the mirrors, seemingly destroying the pocket dimension and the Mirror Silversmith with it.