What does the following quote from Maniac Magee mean? “The east Enders stayed in the east and the west Enders stayed in the West and the less they knew about each other the more they invented.”

Maniac Magee is set in the fictional town of Two Mills in Pennsylvania. This is a deeply segregated community in which people of different races inhabit different worlds and different realities. However, Jeffrey is too young and naive to know anything about this. He flits comfortably back and forth between the West End, which is an all-white community, and the East End, which is exclusively black. It is rare indeed that a person of either race should venture into the other's community.
As the quotation in the question indicates, both communities remain firmly in their own little part of town, and they are typically not willing or able to mix with outsiders. Because of this, there is a good deal of mutual ignorance between the races in Two Mills. As they know nothing, they tend to make up stories about each other, constructing urban myths out of scraps of hearsay, gossip, and prejudice.