A Sanctuary is a space hidden and protected by magic. It is made specifically for Downworlders who are on the run from Shadowhunters and the Clave and others who may be capable of tracking them. Jace simply referred to those seeking sanctuary as rogue, on-the-run criminals hiding from their Law.
The only known Sanctuary so far was one in an apartment in Park Slope, Brooklyn. It was maintained by Madame Dorothea, and her mother—a "Control" warlock—before her, and they were said to have been paid handsomely for the temporary refuge.