A metaphorical town in which drunk/high people reside. It is a special place for everyone who you're sure, could be seeing pixies.
Realistically, pixietown would be the most dysfunctional, trippy town in the world, full of rainbows, boobs, doritos and anything else that makes pixietown's residents smile, which is pretty much anything colourful and shiny.
Person 1: Dude, Henry's absolutely gone, he's had like 20 cones.
Person 2: Yeah man, he's in pixietown.