It's the Principality of Sealand, and it is located 6 miles off the coast of Suffolk, England. The principality is unrecognized as an independent state by any other sovereign state. However, a British court ruled that the UK did not have jurisdiction over the tiny town located on a former WWII sea fort.
The man who created the principality is former British Major Paddy Roy Bates. He established his Principality in 1967 and his close friends and relatives claim it is an independent sovereign state. However, despite his title, it is doubtful that we'll ever see the Prince of Sealand invited to Buckingham palace anytime soon.
The prince of Sealand does not live IN Sealand, rather Prince Roy and his family live in mainland England. One of the current plans for the tiny state is to create an online casino.