The Island appears to be a long-standing facility. The dilapidated state of the Lighthouse and the Mill suggests decades of neglect or automated operation without human oversight.
Theory: The Island was originally a processing plant or a "correctional" facility for wayward children, which corrupted over time into a nightmare engine.
The Cycle Continues?: If the "Glitched Reality" theory holds true, their escape might just be the start of a new loop, or they might now be infected by the island's corruption.