The words are long and latinate, but the concept itself is simple. If gods exist, where are they? Where do spirits dwell? If you believe they exist within the same world that we exist in, you are saying they are immanent. If gods and spirits dwell completely beyond the physical realm, and we must leave the physical to interact with them, your belief is that they are transcendent.
There is, as with many things, a middle way: panentheist thought argues that the divine exists both within and beyond. Don’t confuse this with pantheism. Pantheism argues that the universe itself is divine—the most absolute immanence.
Most people tend to believe in one or the other, rather than both, though a religion may attempt to encompass both in one argument. Hinduism unites immanence and transcendence by containing transcendent individual gods within the immanent Brahman. The Christian god is often regarded as a transcendent god who becomes immanent through Jesus. The Trinity adds a figure of complete immanence in the Holy Spirit; the Father remains a transcendent figure. Which of the two Jesus is varies—a “personal Jesus” requires immanent revelation, while a distant figure who is not on earth, but will one day return to it, is transcendent.
Pagan belief about gods and spirits varies, though many well-known practices lean towards transcendence. The belief that the astral plane is completely separated from the physical world is transcendent. This explains why so many believe that out-of-body experiences are essential—if what you seek is not connected to the physical plane, you must leave your body. Meanwhile, godphones, godspouses, godchildren, and godbothered seem to imply a popular undercurrent of immanence.
My own beliefs about such things are (despite my terminology) immanent. Elsewhere is not separate from us and our physical world so much as it is parallel to it, as time is to space. Yet I also have transcendent tendencies, especially with the natures of gods and spirits. I believe my god is present within the entire multiverse. As I cannot exist within more than one timestream, and he exists within them all, this is technically panentheist—his existence is both within and beyond.
In practice, though, I tend to emphasize the transcendent elements of his nature. He knows more than I could ever remember. He has memorized places I could not even comprehend. I suppose to some extent I’ve associated the transcendent with mystery and power. Is it habit? It could be. But as long as I remember not to neglect the knowable for the unknown, I should be fine.