Place to hang all the various Cobalt application components so they can find each other. Outside of any island. More than a little ad hoc.

It is there to provide a control point for an island, one per island in an image. Outside of any island (or at least it should be). 

Replication unit. Island is a (except for classes) self containded bundle of state. in Croquet and Cobalt it contains a Space. Other applications can put other things in it. Island also has a registry of all of the objects in it that have been looked directly at by outside requests. An island is assumed to contain itself.
root of a scene graph. is a kind of TFrame. The island and it's contents are orthogonal. In Cobalt/Croquet we assume that the island contains a single TSpace, with the #mainEntry registration containing a reference to the main teleport entry.