[Hollywood]

They sail away to the Grey Havens or the Undying Lands where all immortal beings live after the age of men begins.

Basically it's where the elves and wizards go to live forever, because Frodo was the ring bearer, the burden was too much for him and thus he was invited to the grey havens along with the rest of the fellowship.

The grey havens do not make you immortal, so Frodo and Gimli and whoever else made it there did die after a while, but they all died in peace surrounded by their friends.

I've never finished the books, so I'm reciting what other people have told me.