There are several Pokemon Islands in the Multiverse, most of which are Union-aligned. This one will focus on those from subtheme Pokemon-6, and to a lesser degree, Pokemon-1.
Aside from the native Shamoulli people, which have apparently inhabited the islands since antiquity, the Pokemon Islands were discovered in the late 1800s by shipwrecked American and Japanese sailors. These sailors overcame their differences and banded together to create a new society, most of them opting to remain, and sending back to the mainland for others to come. By the 1930's it was a bustling place with a variety of rare Pokemon completely unknown to the rest of the world.
World War II saw the end of that, as the Japanese occupied the island. Guerrilla warfare broke out, allowing the natives to resist until American reinforcements came several years after the fact. The Americans took the islands as part of the war settlement. The natives, however, were not particularly fond of this, and over the next several decades direct American governmental influence diminished to the point of a military presence, the basic Constitution, and little more than a formality.
The islands consist of several smaller, large islands, and a myriad of tiny islands. The largest islands include Kanto (where the capital, Saffron City, is located), Johto, Hoenn, Sinou, and Orre, among others. Further out, though not generally considered part of the Islands by the natives (although usually thought of as such geographically) are the Orange Islands. These islands, save for a few, including Shamoulli Island, which is home to the remaining (though thoroughly modernized) Shamoulli tribes, are generally a no-man's land, unclaimed by any government and overrun with criminals of all varieties. In general one's life expectancy drops like a rock the instant that they set foot on one of the main islands, which are "governed" mostly by anarchy, though to some extent governed by the strongest Pokemon trainers and martial artists there.
There is a lot more information on this theme, which is quite divergent from canon Pokemon. Please go to the MUSH for more information.