Stars form in large, dense regions of gas and dust known as molecular clouds. These clouds are located primarily in the spiral arms of galaxies, where they are exposed to intense radiation from nearby stars. As the gas and dust in these clouds are subjected to this radiation, they begin to collapse under their own gravity. As the collapse continues, the cloud becomes denser and denser, and eventually a protostar forms at its center. Over time, this protostar continues to contract and heat up, eventually reaching the point where nuclear fusion can begin in its core. At this point, the protostar becomes a fully-fledged star, and the process of star formation is complete.
TL;DR: Within the clouds of dust and scattered throughout most galaxies.