The Workyard is the area directly south of your home and is where you'll build most of the building and smithing workstations using the blueprint desk. The Workyard can quickly get a bit crowded without the increased yard space, so its a good idea to place workstations carefully.
Your starting Workyard has a 6x9 area containing a timber stockpile and a stone stockpile, a 11x6 area, and a third area shaped like a 15x9 area with a 6x5 area in the bottom left corner missing. The swampy area to the north of the Workyard will have several green slimes at day time (they despawn at noon) and several bats at night (they despawn at midnight).
The workbench for placing all the workstations is located in the northwest corner of the Workyard. For most stations, you first have to unlock the related technology.