In his 3-volume commentary on Revelation, David Aune delineates the hermeneutical possibilities for the Greek expression τὴν παρεμβολὴν τὼν ἁγίων in Revelation 20:9a. They are
1) The heavenly city.
2) The encampment of the people of God which is identical with "the beloved city."
3) The encampment of the people of God stationed outside the city in expectation of the impending attack.
4) The martyrs with Christ in Jerusalem (Revelation 14:1-5).
5) An army of angels (perhaps the force mentioned in Revelation 19:14) that is "bivouacked" in Jerusalem's vicinity. In fact, Eichhorn renders the phrase with the Latin phrase "castra angelorum" (cf. 2 Kings 6:17; 1QM 7:6 and 19:1).
Number 1) is taken from the commentary on Revelation by R. H. Charles. He argues that the heavenly city descends to the earth, but as I've noted previously, his interpretation is not necessarily the correct one. The heavenly city could be under attack insofar as its representatives are being assailed. Jesus taught that if you harm his brothers, you hurt him. Remember the words, "Saul, Saul, why are you persecuting me"?
Number 5) might also be a viable possibility.