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A party spot is set to decide where colonists have parties. More than one party spot can be placed, however only one is actually active (i.e. colonists throw parties only around one of the spots).
Party spots are particularly useful when lots of your colonists are hospitalized. Having colonists in bed near a party still counts as attending the party, therefore even immobilized colonists can stay sane. Unfortunately there is no way to predict them or to reliably get parties started. Bestowing ceremonies are also performed here if they do not require a throne room and none is assigned to the pawn to be bestowed upon.
Party spots do not require a colonist to construct or deconstruct, nor is there a cost, build time, or skill requirements for placing them. Instead, they are simply selected from the menu and placed directly by the player.