A SL Sim is an island, held on a server - which can I believe be your own machine running SL software. It has distinct boundaries, I often crash when crossing them; some have restricted access.
http://secondlife.com/community/land-islands.php
"Islands are priced at US$1,675 for 65,536 square meters (about 16 acres). Monthly land fees for maintenance are US$295." That's what it costs the Sim OWNER. They usually take tenants (shops or houses etc) and pass on the costs.
Remember SL is BIG - I saw figures recently that it was an area of land about the size of New York populated by about 750,000 RL people. (many have multiple avatars)