Atlantis was either an island or a continent that existed thousands of years ago. The entire island was destroyed by witches who could not control their untrained magic. The existence of Atlantis is presumed a myth in the mortal world and its actual location was never revealed. It is possible that the island was not completely destroyed, but merely sunk to the bottom of the seas.
The destruction of Atlantis, along with other catastrophes, was the reason the Elders decided to found Magic School. Through the education of magic, they hoped to prevent destruction like this from ever happening again.