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The Master's Terrace in Karazhan is the ledge running along the exterior side of the tower itself. Falling off the terrace will result in a quick death.
Interesting to note is the view of Deadwind Pass from the terrace. While the view to the east is extremely similar to the actual zone, the view toward the west is significantly different. Specifically, the chapel, graveyard, and crypt are missing, and in their place is a valley between the rock walls that extends to the southwest, with another village located in that valley. It is unknown whether this was an earlier planned model for Deadwind Pass, or simply an oversight on the designer's part. If you look below you, you may spot a Deadwind Villager, a neutral mob, which resembles the ghosts you normally fight outside Karazhan's front entrance.
Note that there are at least 3 areas in Karazhan all named Master's Terrace. The one where you read Medivh's Journal and summon Nightbane is on level 3. It is a long stretch where you can mount and gallop across.