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She's confined in the Scarlet Devil Mansion; she's often portrayed as being locked in the basement, but in two different official works (Bohemian Archive in Japanese Red and Inaba of the Moon, Inaba of the Earth) she seems to be able to roam the mansion pretty freely.

As to the "why" of her confinement, it's because she's crazy (or "emotionally unstable"). Crazy vampires with the power to destroy anything at will are best kept confined, lest they cause problems. However, it's also suggested that she may be a willing shut-in; after all, if she really wants out, there probably isn't much that can stop her.

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