When the universe expands does it create new space, matter, or something else?

Yes, space is constantly being created. The new space does not hold any matter (like atoms) or dark matter. This means that the density of normal and dark matter decreases at the same rate as the volume increases. However, dark energy, which is something completely different and thought to be a property of vacuum itself, is being created with the new space, so the density of dark energy stays constant.

This in turns mean that while the early Universe (i.e. from it was 70,000 years old and until it was almost 10 billion years) was dominated by matter, the Universe is now dominated by dark energy.

And it will only get worse.