Literally, the Valley of Ashes is a massive trash dump. Keep in mind that Gatsby's setting of the 1920s is before the EPA and all of our current environmental regulations. The Industrial Revolution took place not too long before the Roaring Twenties, and so the pollution, excessive waste, and overcrowding of that time period carries over into Nick's era. Its name derives from the fact that it constantly "smokes" and cast a grey tint to the air and everything around it. It is conveniently located between the city and "eggs," making it easy for the waste of both locations to make it way there.
Symbolically, the Valley of Ashes is a wasteland of hopes, ideas, and even human life. Myrtle Wilson is trapped there and is willing to escape her earthly hell if only to be with an abusive, philandering married man. Fitzgerald's description of George Wilson demonstrates that the Valley of Ashes has drained the life out of him. He probably once considered himself an entrepreneur, but the location of his business has slowly taken away his livelihood and his wife. One could argue that because the Valley is the site of Myrtle's death and Gatsby and Daisy's permanent separation that it also takes away Gatsby's dream; at the very least it takes away Myrtle's life and George's sanity.
The Valley also serves as a wasteland of the filthy rich. As they live their lives of excess in the city and on the "eggs," they transport their waste to the Valley, removing distasteful reminders of their overindulgence. This wasteland demonstrates the the corruption of Old Money and the East has far-reaching effects.
Finally, because the Valley of Ashes is the location of the Dr. Eckleburg billboard, which represents an uninvolved god, it serves as a hell-like location. "God" looks down on man's misery and waste and does nothing, perhaps because Fitzgerald implies that for the Old Money people, God has been pushed to the trash heap.
What Fitzgerald calls The Valley of Ashes is "a desolate area of land" that is located about half the distance between West Egg and New York City. Nothing is located there except one yellow brick building "contiguous to absolutely nothing." The building contains three shops; one is empty and for rent, one is an all-night restaurant, and the third is George Wilson's garage. The area is bordered on one side by "a small foul river" with a drawbridge that let barges through. The road through the Valley of Ashes runs next to some railroad tracks that bear trains to and from New York City. It is an industrial area that industry has bypassed.
What gives this place its name is that it is a dumping ground for the tons of ash from the coal-burning furnaces of New York:
This is the valley of ashes--a fantastic farm where ashes grow like wheat into ridges and hills and grotesque gardens, where ashes take the forms of houses and chimneys and rising smoke and finally, with a transcendent effort, of men who move dimply and already crumbling through the powdery air.
Railroad cars full of ashes arrive from the city to be unloaded by men with shovels. As they work, the air fills with ash, blotting out the sun:
Occasionally a line of grey [railroad] cars drawls along an invisible track, gives out a ghastly creak and comes to rest, and immediately the ash-grey men swarm up with leaden spades and stir up an impenetrable cloud which screens their obscure operations from your sight.
The grey men, the grey land, and the "spasms of bleak dust" establish the ugliness and sterility of this place.
On a symbolic level, the Valley of Ashes has inspired much literary analysis. It can be interpreted as a moral wasteland, an indictment of modern industrialization with its destruction of the land, and a visual representation of poverty and hopelessness existing simultaneously and in contrast to the excesses of great wealth. The prevailing atmosphere of the Valley of Ashes is one of despair--the American Dream gone wrong.
The Valley of Ashes in The Great Gatsby is an area of land between East Egg and West Egg. It is a barren wasteland that is what the name calls it. It is a valley in which ashes and waste of the rich are dumped upon. Fitzgerald describes this valley as being a rather gray and dull place. His language creates a similar tone as well.