Jess and Leslie invent Terebithia as a way of dealing with (and retreating from) the harshness and difficulties of 5th grade and life in the rural town of Lark Creek. Although not actually "evil," Jess must cope with the demands of his family (where, as the only boy, he is considered a workhorse by his parents and treated comtemptuously by his older sisters). His father seems hard and almost cruel throughout much of the book. He doesn't really understand Jess and has stereotypical opinions of what a boy should be. At school, Jess is different from the others--artistic, creative--inwardly a bit of a loner. He does not seem to have any real friends and spends much of his time either observing or trying to blend in so he stays under the radar of both his teacher, Mrs. Myers, and the school bully, Janice Avery--though he does have his principles and will stand up for them if needed. When Leslie Burke moves to town, and a new school year begins, you can also see that the other students at Lark Creek Elementary are--while not actually evil--a body of conformists where anything (or anyone) different is viewed as dangerous or unacceptable.
The "monsters" which Jess and Leslie tackle in their magical world are not literal, but are all of these things combined. The feelings that they have towards their classmates, teachers, the townspeople of Lark Creek, Jess's family members, and especially Janice Avery are sorted out by fighting the imaginary "evils" (which repesent these people) that "threaten" their Kingdom.
I hope this helps--