Drugs such as PCP, ketamine, and dextromethorphan produce an inhibitory effect on neural circuits of the central nervous system. This manifests as a peculiar anaesthetic state referred to as "dissociation" - best described as a disconnection of conscious awareness from sensory and environmental processing. This is due to the blockade of communication between sensory input and the processing structures of the brain; and between various circuits of the brain itself - depending on the dose.
Simply put; dissociatives inhibit the complex processing capacity of the brain to translate sensory stimuli into experience or awareness, leaving the "mind" detatched from the senses, the environment, and the reality at hand (or in higher doses, detatched from essential data stored in other areas of the brain pertinent to identity, self awareness, and memory).
The overall inhibition of neural communication produced by these drugs is due to their ability to block the function of the NMDA complex - The NMDA complex is the molecular device responsible for modulating synaptic plasticity. By the opening or closing of a gate-like structure known as an ion channel, it modulates the intensity at which nerve cells effectively transduce signals between one another, at "synaptic" neural intersections. PCP, ketamine, and DXM, all attatch to specific sites on the inner surface of the NMDA complex (PCP1 site), subsequently blocking the opening of the ion channel.
A summary of the workings of NMDA system is available here