A long time ago, in a galaxy far, far away, there lived the Fourtoes, a race of technologically advanced beings capable of great feats of genetic engineering and inter-dimensional wormhole travel. Ordinarily, the Fourtoes observed a kind of prime directive, not interfering with less advanced species. But when one maverick Fourtoe named Demiurge found himself marooned on an utterly insignificant little blue-green planet orbiting a small unregarded yellow sun, far out in the uncharted backwaters of the unfashionable end of the western spiral arm of the Milky Way galaxy, he couldn't resist playing god to the amazingly primitive ape-descended life forms he found there.
Demiurge genetically enhanced the humans, leapfrogging millenia of their evolution. He also enslaved his "children," augmenting the Island's natural potential as a kind of psychic transceiver to merge their minds with his own. The result was a highly advanced global civilization centered on the Island, which became the source of myths and legends concerning Atlantis and Mu. Though humanity's service and worship proved satisfying for a time, Demiurge eventually grew homesick. He tried to rebuild his wormhole transport, which harnessed the negative energy of a small black hole generator, but the device malfunctioned catastrophically during one disastrous test run.
The analogy here is to Paris Crater, a massive implosion caused by ill-fated French time travel experiments using black-hole technology in Dan Simmons' books Ilium and Olympos. Demiurge's catastrophe literally wrinkled the fabric of spacetime around the Island, partially removing it from reality. The shock of this calamity triggered massive earthquakes and tsunamis worldwide, as reflected in Sumerian and Jewish myths of the deluge and flood. A massive volcanic eruption rocked the Island, creating Le Crater and burying most of Demiurge's Island civilization under layers of ash and lava like Vesuvius did Herculaneum and Pompeii.
Only a handful of Demiurge's "children" survived the global fallout. The Hansos and DeGroots were both directly descended from the few survivors of this ancient cataclysm. Reproduction with ordinary humans diluted Demiurge's genetic enhancements over time, but vestiges remained in the form of heightened mental talents, including occasional psychic powers. Indeed, many outstanding thinkers throughout history (e.g., John Locke, Jean Jaques Rousseau, Mikhail Bakunin, etc.) were indirect descendants of the cataclysm's survivors. Only a few powerful families, however, knew about the Island, which they kept a closely guarded secret.
Fast forward several centuries to 1962, when Enzo Valenzetti issued his grim mathematical prediction of humanity's extinction. Alarmed by Valenzetti's chillingly plausible results, a Hanso named Alvar approached the DeGroots about teaming up to save the cheerl...er, world. Together, they created the Dharma Initiative, which was devoted to influencing Valenzetti Equation's core factors in hopes of averting humanity's fate. Dharma was located on the Island mainly because its isolation in spacetime allowed scientists to experiment with changing the core factors for a small population sequestered locally without affecting -- or being affected by -- the rest of the planet.
The Dharma scientists were also intrigued by at least two other features of the Island. For one thing, it seemed to be a strong source of "geologically unique" electromagnetism. If this exotic energy could be tapped, it might render fossil fuel and nuclear power obsolete. Minds, moreover, seemed to merge together on the Island, like radio transceivers tuning to the same frequency. If this effect could be controlled, Dharma might be able to broadcast good vibrations globally, pacifying people and ending the cold war. Both phenomena, of course, were actually caused by Demiurge's advanced technology, which remained partially intact under ash and volcanic rock.
The aforementioned black hole generator was responsible for the Island's "unique electromagnetic fluctuations." The device generated a micro black hole that released Hawking radiation as it evaporated, creating a "kind of Casimir effect." Quantum theory tells us that the vacuum is actually teeming with "virtual particle antiparticle pairs" that wink into existence then annihilate each other. The Casimir effect occurs when parallel metal plates are sufficiently close that the density of virtual particle antiparticle pairs is lower between the plates than around them. The resulting Casimir force pulls the plates together, as depicted in this diagram by Stephen Hawking:
Like the space between parallel metal plates, the event horizon of an evaporating black hole is also a region of negative energy density. As virtual particle antiparticle pairs pop into being, the enormous gravitational forces pull them apart, imparting tremendous energy to particle and antiparticle alike. One gets sucked into the black hole, gaining negative mass that causes the black hole to shrink. The other becomes a real particle that escapes as Hawking radiation. Still with me? Good, because here's where this all pays off. The negative energy generated by the Casimir effect and evaporating black holes makes them capable, in theory, of wormhole stabilization!
The Dharma scientists had presumably realized as much by the time they made the Orchid Orientation. I believe the film depicts an attempt to send Bunny 15 forward through a wormhole into the near future. What the scientists mistakenly did instead was pull a second Bunny 15 backward into the past. The chaos caused by the twin bunnies ("Don't let them touch!") reminds me of the movie Timecop, in which time travelers are admonished never to make physical contact with past versions of themselves. My guess is that the Incident involved Dharma participants opening a wormhole and pulling their twins from elsewhere in time with literally explosive results.
Limbs were lost and histories rewritten, as suggested by the apparent transformations of Mark Wickmund, first into Edgar Halowax, then the one-armed Marvin Candle. Such a scenario could also explain the Others' creation -- they're time twins who survived the Incident -- which is why one of the voices on the Orchid Orientation sounds suspiciously like Richard Alpert. Jacob's ghostly state could be due to the historical rewrites, like how Marty McFly fades partially away near the end of Back to the Future as a result of changes to the past. Or maybe Jacob was blasted out of time by physical contact with his twin (e.g., Alvar or even Magnus Hanso).
When the dust settled, and Dharma realized what had happened, the Initiative's plans evolved. The Orchid Station was reconfigured and renamed the Swan, which may itself be a black hole reference. The constellation Cygnus (i.e., Latin for "Swan") contains an x-ray source that's widely believed to be a leading black hole candidate. Cygnus was also the name of a (lost) spaceship discovered just outside the event horizon of a black hole in Disney's science fiction classic The Black Hole. I believe these are clues that, behind the Swan's concrete barrier, stabilized by an electromagnet, was a micro black hole courtesy of Demiurge's technology.
Sayid compared the Swan barrier to the concrete dome over Chernobyl. That's because the Hawking radiation released by black hole evaporation is thought to be very high energy, capable of frying those directly exposed. Swan's electromagnet prevented the black hole from evaporating completely -- a black hole can, in theory, "be stabilized by endowing it with a sufficiently large magnetic charge." The electromagnet may also have fed vibrational energy into the black hole, generating gravity waves like the alien communicator in Larry Niven's short story The Hole Man. The system was reset every 108 minutes to keep the black hole from growing too big.
So why even bother with the button protocol -- why not just automate the system? I believe that, by the time of the Incident, Dharma had concluded their best chance of changing the Valenzetti's core factors was to change history itself. The goal of the Initiative became cultivating people worthy and capable of this delicate task. The various stations served principally as a psychological experiment, but they were also a kind of test, set up to get someone, some day, to stop pushing the Swan button. Whoever had the guts and selflessness to turn the Fail-Safe key would then be blasted back in time to save the world. But no even one took (let alone passed) this test, until Mr. Desmond David Hume.
When Locke prevented Des from entering the code, the black hole in Swan began to grow. The electromagnet increased power to compensate, which is why metallic objects flew toward the wall. Had Desmond not turned the key, the black hole quickly would have overcome its confines, sinking into the Earth and eventually consuming the planet. By activating the Fail-Safe, Des shut down the electromagnet before the black hole reached critical mass, causing it to evaporate in a blast of negative energy and Hawking radiation. That radiation is what turned the sky purple and caused the EMP that crippled the Flame. The negative energy opened a wormhole into Desmond's past.
When the wormhole opened, Desmond used another of Demiurge's technologies, the psychic transceiver, to broadcast his consciousness back in time. Like the father and son who talk via shortwave radio through a wormhole in the film Frequency, Desmond made contact with himself in the past because both share the same mental frequency. It's no coincidence that only Desmond's consciousness made the trip -- Dharma may even have designed things that way to prevent physical contact with past selves. The key, regardless, is the Island's capacity to serve as a psychic transceiver. That's why radio transmission and reception have been recurring metaphors from the beginning of the show.
Arthur C. Clarke once noted that any sufficiently advanced technology will look to us like magic, a comment that's become the informal credo of "hard" science fiction. Clarke helped Stanley Kubrick write 2001: A Space Odyssey, which is the rare hard science fiction film and a personal favorite. Aliens intervene in human evolution and leave behind technology in the form of mysterious monoliths -- the original black rocks. Dig below the Island's literal and figurative surface and I suspect you'll find the magic is similarly explained by Demiurge's alien technology. Which, in turn, makes me wonder if that's the real reason the people who sent Not Penny's Boat are looking for the Island...