The places characters live in the Lands Beyond totally define who those people (or creatures or objects or… you get the point) are.
Let's take a closer look. Everyone who lives in Dictionopolis – particularly King Azaz, the cabinet members, the Spelling Bee, and the Humbug – value words and language more than anything. In contrast, those who live in Digitopolis, like the Mathemagician and the Dodecahedron, value numbers.
The list goes on: Alec Bing, who lives in the Forest of Sight, specializes in seeing things as they actually are, while the Soundkeeper, who lives in the Forest of Sound, is focused on sounds: what they are, where they come from, and how they should be catalogued. The Lethargarians, who can barely pull themselves together to do nothing, live in the Doldrums. Question-asker Canby keeps finding himself on the Island of Expectations. Meanwhile, the only folk who live in the Mountains of Ignorance are the various and terrifying demons.
We think that's enough examples, how about you? Bottom line: you are where you live.
The Phantom Tollbooth lives up to its allegory status in one major way: characters' names frequently tell us about who they are. The biggest examples of this are Rhyme and Reason, who represent, well, rhyme and reason (harmony, rationality, and together, balance).
Of course, the Dodecahedron tells Milo flat out that, in Digitopolis, things are always named what they are. Because he is a Dodecahedron, that's what his name is. His name indicates that he will have twelve faces, and he sure does. (For other examples – and there are tons of them – check out the "Character Analysis" section.)
In the Lands Beyond, what people eat says a great deal about them, and usually indicates what is most valuable to them. In Digitopolis, people treat food the opposite of how we do in our world. They start eating when they're full and keep going until they're not. They eat things like Subtraction Soup. Sure, we non-Lands Beyond humans need food to survive: the people of Digitopolis need numbers.
The people in Dictionopolis don't eat the same way we do, either. They eat their words. Literally! Individual letters have their own tastes, like fruits and veggies, and people have to eat whatever they say when they're ordering meals (this doesn't turn out so well for Milo, who doesn't know this rule). So, we can tell that the Humbug thinks of himself as a classy guy because he orders classic dishes like "roast turkey" (7.44), while the King is fancier than anyone else at the banquet: he's the only one to order his meal in French. Ooh la la.
(For more on the importance of food in The Phantom Tollbooth, see "Symbols, Imagery, Allegory: Meals.")