Sadly it's not really an "island" anymore. Just a patch of water. There used to be an island there. You get warped there sometimes when something glitchy happens. Happens more frequently when there's a lot of lag.

It's one of the lesser-known areas of the game. Like the jail for temp-banned players (which has long since been removed, but oh what a fun time it was..).

Anyway, this is lag island:

http://imageshack.com/a/img910/7760/RIXQlV.jpg (Unsupported image host)

(This was taken during the holidays when the player count was consistently 4k+ and the lag was at its worst)