Not much is known, and there is probably more info about it, but hasn't been reveled yet. It is a eye illusion that is casted on the user. It removes the boundaries between imagination and reality, and allows turning reality to fantasy and vice versa, by using the Yin and Yang chakra. Danzo turned his death into fantasy (surviving Sasuke's attacks), while the Sage of the Six paths turned reality into fantasy and then made his fantasy reality again (creating the tailed beasts.) Algazar:And effects of Izanagi vary from user to user, depending on their dominance over the required bloodlines.