Domain in classification is just a list of objects (or classes) which you want to reveal as a result of image classification. Domain is something like a legend of a map. You should create it before classification (File -> Create -> Domain), and after a window "Create Domain" opening you may click Help, to get help on topic "what type of a domain you need. Domain "Class' is the most useful in many cases. In the next window "Domain Class" you should add some names of classes. This Domain firstly should be used for training in a process of Sample Setting/
From ILWIS Help:
The Classify operation performs a multi-spectral image classification according to training pixels in a sample set. Before classification, a sample set thus has to be prepared with Sample.