It's a pun!
Un Lun Dun is set in the city of UnLondon, which lies underneath our London, a shadow where London's rubbish is lured. (See also: Neil Gaiman's Neverwhere.) UnLondon is in danger from the Smog, driven underground by the Clean Air Act and made intelligent by all the chemicals it contains. Two young Londoners, Zanna and Deeba, find their way into UnLondon and are drafted into the war against the Smog.
The novel is Mieville's first and only (as far as I know) foray into YA, and the difference is quite striking. The darkness and oppressiveness of his adult novels are gone, leaving only a surreal sort of whimsy (think Walter Moers): UnLondon is a city populated by smombies (dead bodies animated by the Smog), ninja rubbish bins, people with birdcages for heads, and words made real. The result is a novel which feels actually quite derivative: the genre-questioning intelligence of his adult novels is gone (clearly Mieville is of the school of writers who think young adults can't cope with complexity).
However, I did enjoy Un Lun Dun noticeably more than Kraken or The City and the City, both of which I found inexpressibly dull; its lack of technical cleverness means that it's a lot easier to read, and it certainly kept me turning the pages. It's not going to change my life, and it doesn't live up to the Gothic magnificence of Perdido Street Station, but Un Lun Dun is a decent enough read with, perhaps, some interesting little nuggets to think about.