In the city at the edge of midnight enslaved children work in the clock tower to prevent midnight chiming as this will destroy the Nightwalker. When the clock does strike midnight and the Nightwalker is defeated his spell over them is broken and they vanish, returning to their homes.
It is not stated where all these children were abducted from but Dungeon Master states both the Realm and Earth. The Nightwalker could just be choosing children from the Realm but abducted Jimmy Whittaker because he was fated to enter the Realm on the roller-coaster ride with the others until homework obligations cancelled his trip with them to the amusement park. Although the contemporary nightwear and one of the girl's hair grips seem to suggest the abductees are from current Earth.