Blood Gulch is a small box canyon in the middle of nowhere. Its only significant features are two nearly-identical bases, one at each end, and the extensive cave system underneath. It is the setting for much of the Blood Gulch Chronicles and contains the original home bases for the Red and Blue Teams.
Blood Gulch became significant only after the Director sent Agent Florida there with the Alpha AI to hide its existence. After Florida's apparent death, Tex arrived in the canyon with the AI Omega, who began to cause trouble for the Reds and the Blues, leading them to leave the canyon to pursue him.
After the events of the Blood Gulch Chronicles, all inhabitants of the canyon were reassigned, with the exception of Sister, who remained at Blue Base. In defiance of his orders, Sarge remained as well with Lopez, refusing to leave while any Blues stayed. Sarge finally left the canyon after Washington and the Blues began to work together. Lopez left sometime later to rejoin the Reds in Valhalla. He claimed to have killed Sister (though Grif had doubts); if so, this would mean Blood Gulch was left entirely void of inhabitants.
The Reds and Blues did not initially know about the caves below Blood Gulch, but as time progressed, they ended up discovering them and exploring them to an extent. The first appearance of the caves was when Doc, having been abandoned by both the Reds and the Blues, discovered the alien vehicle in them. Later, it was revealed that Tex and Church's original bodies fell into the caves, as did Sarge when Simmons, Grif, and Sister buried him.