Fold space is the dimension in which Guild heighliners travel allowing them to go faster than the speed of light. When going through folded space, the heighliner travels in-between the fabric(s) of space and time, enabling it to enter another, separate dimension separate from our space-time continuum.
The theory is based on a model that suggests that if time as we know it is a straight line, the line can be "folded" at two distinct points allow the vehicle to jump instantly from one point to the other. Space travel without the folding effect would be impossible, taking thousands of years even if the starship was travelling at the speed of light itself.
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In Chapterhouse: Dune the Spacetravel mechanics are briefly explained in a bit more detail.The Holtzman-engines create a "Warp-bubble" and the entire Known Universe actually moves "through" the Heighliner and it's Warp-bubble to the exact point the (at the time artificial) Naviator(-Thinking Machine) computes..