Dragon Nests are areas designated for one type of Dragon to call it's home.
In order to use a Dragon in battle, it must have a Dragon Nest to live in.
You can place up to two Dragons in each nest, and except for Crystal nests, the Dragon must be of the same element as the nest.
Some Dragons have more than one element and therefore can reside in more than one nest.
Dragons also generate Gold for the nest at varying rates. This can be viewed in their Basic Info menu as Income.