I would either frame it in and make it a closet storage for stuff you don't need to access on a regular basis (example: Christmas decoration), or tear out the niche completely.

Putting a mirror on the back and/or side wall(s) would reflect the available light. If you put plants up there it might even look a bit like a window. Not sure if you could water plants up there, but still.

maybe frame in a door, paint it the same color as the wall so it "becomes one" and use the space as storage for things your don't use often (i.e. holiday decorations, luggage, camping gear, etc.)?

build a stacking ledge to it for your kitty to climb up. hehe

I've seen people display large pieces of pottery or glass or figurines. Woven baskets or large pictures. Really the possibilities are endless.

I would put a chair up there and just make people wonder...

My niece has one in her livingroom and she left it as is. Being that it's so high up, you never notice it.
If this really bothers you, I'm on the same bandwagon as those who have posted to make it into storage. If you put anything decorative in there, how hard is it going to be to get up there to clean?

Completely fill it with stuffed animals with all the heads poking out staring at you.

call an electrician and have the add in a pot light there, then do as you wish

My inner cat-burgler would say hang a huge painting over the nook to cover the hole and function as a secret storage space. You could even add a small safe to hide your valueables.

However unless your condo is lacking storage, I would remove it all together. If you've got these wonderfully tall ceilings, why ruin it with a horizontal line that stops the eye.

Maybe have framed art or a canvas as a door and use it as storage? Barn door style that slides in a style/color you like for a little interest.

The chair idea is kind of clever! :) I was trying to think of something big that would stand out. A fancy or painted out one maybe?

Ooh. Maybe a tension rod with a pretty panel of fabric or tapestry if that's your taste? I think I spy an Asian style teapot on your bookcase...maybe a pretty Japanese noren hung on a tension rod to cover storage?

How about a raven perched on a bust of Pallas?

I like the storage idea...who can't use extra storage?! The idea of framing it in, and adding a door will make it look much cleaner too.

Big, tall, colorful books that you rarely look at!

Attach a ladder to the wall to make it a reading fort. If I was a kid I would be demanding that's what it be. Bunch of pillows and I guess battery powered lighting (oh, battery powered Christmas lights) and bam, best thing ever.

I would guess that there is duct work in there so removal might not be an option.
It would be a pain to use as storage but if you need storage, that's a great idea.
It would also make a great "tree house" reading nook (for kids).
Other than that, I like the idea of putting something goofy up there, like the stuffed animals (or dolls - how wonderfully creepy!), or a chair, or the ubiquitous deer head. Just pick something that will still look good if it is a bit dusty so you only have to clean it once or twice a year.

A large piece of glass or pottery would look nice -- if the piece is multicolored, dust will show less.

It looks like it was framed out for lighting for the lower nook. The top and bottom may have been originally built as a closet with frameless doors. What's to the left of it on top? How deep is it?

If you don't want to do anything construction-wise now, my vote is on a big piece of sculpture.

I think we need a wider shot (one of the entire wall) to get a good idea of what kind of space that is. If it's just some random nook on the top left of the wall, decorating it may draw more attention than you want.

A life-sized sculpture of Gollum peeking down?

I like the idea of stacking bright books. Arranging them in an unusual pattern might be a fun exercise.

A friend had a very similar, awkward space. He put an antique trunk, the kind with the curved top (making it impossible to use a coffee table), in the space. It provided a 'display' of sorts for a family heirloom and the trunk could still be used for storage for seldom needed thing.

Lean a large painting in there.. or a cluster of smaller to medium sized paintings.

Or punch out that middle section and build a floor to ceiling bookshelf.

Is that a light over the bookshelves? If so, wiring an outlet in the upper niche would be easy (I mean for an electrician, and since it is easy it would not cost you too much). With a light up there, the space would make a great home for whatever large art piece you like.

Nevermore!

Do a shelf build out in that area for books and displaying things and attach a sliding ladder.

I love cbreynolds idea! Cute!

My first thought is get a really nice piece of art and then add a spot light or something to light it up. Might be a good way to add some color and class.

I'd do something that was amusing to me... like a pinata. Really, anything sculptural that is secured would be fun. I'd also paint the recessed walls an interesting color.

I like the idea of something goofy or decorative. It doesn't need to get much light to be fun.
But whatever is there has to be balanced with what's below. I can't quite tell how deep the nook below is, but the shelves that are there look a bit scrawny for the space. I want to put an antique armoire in there instead. Then the top thing can be heftier. I never have enough storage. I'd get a decorative storage box or basket and put it up there with something stored in it.

I love your idea!

Paint the back well some bright pop of color- yellow, turquoise, etc.- but something that goes with your design in the rest of the room. Then find an interesting mobile to hang in front of it, or even a bunch of ornaments- not Christmas, but maybe something geometric, like this: http://www.westelm.com/products/confettisystem-geo-glass-ornaments-d385/?pkey=call-sale&cm_src=all-sale||NoFacet-_-NoFacet-_--_-
Just some things to add a little detail and fun. Let us know how it turns out!

Living in apartments my whole life, I can't help but see it as storage. You could get a colorful storage bin or box of some kind and put stuff up there that you rarely need to get to. I wouldn't put decorative items in there because it will get dusty and you might forget to dust it, since it is so high and you won't be able to see the dusty surface.

I agree with those who suggest remodeling the space. First you need to find out what duct work, pipes, or electrical wiring runs through the horizontal dividing space.
What about making it all one wall and then installing a door on the other side of the left hand wall to make a large closet opening from that room? If that room is the kitchen, you'd have an amazing pantry!

I'd just enjoy it as an architectural feature. It's like those spaces above kitchen cabinets that everyone has this need to fill with baskets and other clutter. I also hate the idea of covering it up or making it a closet. I'd find a gorgeous Farrow and Ball paint colour for the wall at the back and paint it and just enjoy a color blocked architectural feature. If you must, have an electrician put a light in the bottom to throw a light on the new color and cast shadows. But really...keep it simple.

A trompe l'oeil hatch in the ceiling or door in the wall, just for fun.

Often, people post these real mind bogglers:
"I have a brown velour couch and all the walls in my living room are painted black - how do I cozy it up? PS I need the couch and I can't repaint"
So when I saw this post, scrolling down the main page, I thought "Geez, just shove a vase up there, people are really getting lazy..." And I click the post and see that the space in question is the same size as my bathroom. Nice cropping :)

Living in an earthquake zone, I'm put off by the idea of some pottery in the niche unless it's secured with "museum wax," or a similar product. OR if you don't actually want/need to use the niche, how about hanging some kind of textile above the niche, to hang down over it and obscure it?

I'd put a huge, textured, handmade basket up there. It's sculptural, it's light and it's interesting enough to fill the space.

I think the space begs for a huge, artificial floral arrangement.

First off, is that space as huge as it looks? Wow!

Second, before using that space (with a ladder of some kind) for kids to clim into, I'd double check the structural integrity of the "floor" of the niche. It could well just be wallboard, and the kids would break right through.

Third, I think I'd do something that works with the room's other decor. If at all rustic, maybe a very large basket, either a colorful ethnic one or a very simple natural toned one. This would be light weight and use a lot of the space.

Or, if contemporary, maybe a large interesting sculpture that pretty much fills the space. Something like painted papier mache wouldn't need to be heavy. Or wood and wire. If the "floor" is sturdy enough, it could be a heavier material.

Or, maybe an interesting lighting fixture -- one of those accent lamps that are more decorative than functional... an electrician could probably install an outless connected to the can light in the lower niche, so they would switch on together.

Or something like stores use for holiday displays -- oversized 3-D nowflakes or a branch with fake birds or a dollhouse facade...

Just keep it to something few and simple, not cluttery, and not so detailed that looking up will frustrate the viewer who can't see anything small from the distance.

(Books would look tiny, judging from the shelving in the lower niche -- don't go there! Unless with oversized fakes!)