It is the imperial capital of the fantasy world known as Fantasia (called Fantastica in Michael Ende's novel). It is also the official home of The Childlike Empress who rules all the land and it's inhabitants.
All of the inhabitants of Fantasia arrive at the top of the Ivory Tower to seek help from the Childlike Empress, but Cairon, the Empress's herald, informs them all that the Empress is dying, but that a warrior named Atreyu might be their only hope of stopping the Nothing, the force that threatens Fantasia. When Atreyu arrives, Cairon bestows him with the AURYN, the symbol of the Empress.
The Ivory Tower is seen again, floating through a galaxy-like void alongside other fragments of Fantasia; the Nothing has consumed almost everything in the world. Atreyu, riding on Falkor the Luckdragon, arrives at the Ivory Tower, believing he has failed the Empress, since, in order to save her, a human child has to bestow upon her a new name. She reveals that he has not failed, as the human child he has made unknowingly made contact with is the one reading the book: Bastian Balthazar Bux. Bastian, who is reading this, initially does not believe this, but as the Nothing starts to slowly destroy the Ivory Tower and knocks out Atreyu, Bastian, at the last moment, gives the Empress the name "Moonchild." He chooses this name because in the novel, he is drawn to the Empress' eyes which remind him of 2 large moons.
When he meets the Empress, she is holding a single grain of sand; all that remains of Fantasia. Bastian is given the power of unlimited wishes, which he uses to restore Fantasia.
In the second film, the Ivory Tower is only shown from far away, and none of the scenes take place there; however, it is mentioned heavily in the film.
The Empress tells Bastian that she is being held prisoner within the Ivory Tower by an unknown force that he has to name.
Bastian and Atreyu camp out on a cliff overlooking the Ivory Tower, and vow to set free the Empress. Upon further investigation, Bastian reveals the force that is destroying Fantasia to be Xayide, the human embodiment of the Emptiness. To save Fantasia again, Bastian has to take Xayide to the Ivory Tower to set free the Childlike Empress.
After Bastian - who has become manipulated by Xayide's power - accidentally kills Atreyu, he soon realizes what he has done. After seeing Falkor fly away with Atreyu's body, Bastian rides after Falkor on Artax while the Emptiness slowly destroys Fantasia.
After Bastian defeats Xayide and her minions in the ruins of Silver City, Fantasia is restored, and the land surrounding the Ivory Tower is reverted back to normal. The Empress rides on a boat from the Ivory Tower to Silver City to congratulate Bastian.
In the novel, the Ivory Tower is described as not being a tower, but actually a vast city built upwards. From a far distance, it appears as a gleaming white tower, but it is in fact an entire empire of people living within elaborate structures built on top of each other reaching up all the way up towards the clouds in the sky.
At the very top is the courtyard that contains the home of the empress who lives in a beautiful white Magnolia flower made of intricately carved ivory. At night, when the moon is full, the magnolia petals will occasionally blossom and unfold, thus revealing the empress who can be seen sitting in the middle of the big, opened flower.
It is described in the novel:
"The street ended in front of an enormous, intricately carved gate which led through a high white wall. The gate was open. Atreyu hobbled through it and came to a broad, gleaming-white stairway that seemed to end in the sky. He began to climb. Now and then he stopped to rest. Drops of his blood left a trail behind him. At length the stairway ended. Ahead of him lay a long gallery. He staggered ahead, clinging to the balustrade for support. Next he came to a courtyard that seemed to be full of waterfalls and fountains, but by then he couldn’t be sure of what he was seeing. He struggled forward as in a dream. He came to a second, smaller gate; then there was a long, narrow stairway, which took him to a garden where everything — trees, flowers, and animals — was carved from ivory. Crawling on all fours, he crossed several arched bridges without railings which led to a third gate, the smallest of all. He dragged himself through it on his belly and, slowly raising his eyes, saw a dome-shaped hall of gleaming-white ivory, and on top of it the Magnolia Pavilion. There was no path or stairway leading up to it. The traveler must get their by gift."