They had that 'VIP' area set up when we did the dessert party on 7/2. It was as
@kmc8826 described.... it's
not a part of the Plaza Garden area.... it's a small roped off area on the walkway in front of the Plaza Garden. On my night it could have held maybe a dozen people... so not that big. I suspect this can change depending on who they expect.
If the VIP area wasn't there, there would be people there anyway, so it's not a setup that creates some new visual barrier - unless they happen to be super-tall VIPs!
Note that VIPs could be anyone.... real VIPs of WDW, people who have paid for the VIP tour guides, etc.
Last note, on my night only 3-4 people showed up in the VIP area... it was actually kind of nice because it left a visual "gap" right in front of us which made for better viewing of the very bottom of the castle.