What is the background in this image?

From Toy Story Smash it:
toy story smash it background

I think it is just a sky box but I wasn’t certain. If it is, how do they get the physical floor to blend with it so nicely like that?

This looks like they have a plane with an image on it, that spreads as far as the scene goes. Then, they have an invisible plane that the objects use as the floor.