It is a stange feeling indeed to eat lunch in the middle of a ghetto. But it's not entirely unreasonable. The fortress, built between 1780 and 1790, was where Gavrillo Princip, the assassin of the Archduke Ferdinand and his wife, Sophie, the trigger for the First World War, was impriosned there and died there of tuberculosis. Czechs lived nearby and even in the fortress, as it was quite large and designed essentially as a military town. But the defensive walls worked as well to keep people in as out.
When the Germans took over Czechoslovakia, they changed the Little Fortress into a prison. Starting in 1941, it was used as an old age ghetto, and with the insistence of the Danes on knowing the status of their Jews, Theresienstadt, as the Germans called Terezin, was changed into a show ghetto, a Potemkin village to fool the gullible Red Cross. One of the prisoners, actor Kurt Gerron, who had starred in The Blue Angel with Marlene Dietrich, was coerced into directing a propaganda film for Goebbels, Theresienstadt: A Documentary Film of the Jewish Resttlement. Fragments of it still survive, but Gerron did not. When the film was finished, he was shipped to Auschwitz, along with most of the cast.
The cultural life was unique there, with concerts, choirs, orchestras, plays, operas, painting, poetry, and underground newspapers started by some of the boys. The output was impressive, and miraculaously much has survived.
After the end of the war, the displaced Czechs moved back in, and the communist government renovated parts of the fort for its own military purposes, so most of what remains is not as it was while in use by the Germans. But it is still eerie to recognize that you're standing in the coutyard used for soccer in the movie.