Here's my basic theory. The Dharma Initiative was founded by Alvar Hanso (secretly affiliated with the US government and/or Military) to study and harness the unique magnetic qualities of the island. There they were able to harness the island's powers which had many important features such as mind control/manipulation (thus the visions, Walt's appearances and perhaps even the flashbacks or at least the coincidences), matter manipulation (the monster), and above all the ability to enhance/cure/extend life (as seen by Locke, Rose and Sun). All of these powers were very beneficial (especially for the US government/military) but had to be kept a secret. They were also able to use the magnetism to hide the island. Now there are a few possibilities of what "hiding the island" might mean. 1. I may mean making finding the island nearly impossible because the magnetism interferes with navigation equipment such as compasses, GPS, Satellites etc. 2. It may mean using the uniquely strong magnetic fields to some way literally make the island invisible by bending the light waves (much like a black hole) 3. It may also mean creating an electromagnetic barrier around the island that would divert anything from its path. 4. It could even mean transporting the island into another dimension. It may be a combination of a few of these. The Dharma initiative went about its business successfully until The Widmore group found about what was going on. They too wanted to use the island's powers. Somehow they were able to find the island (maybe from a spy on the inside or Mr. Widmore's governmental connections), and a mini "war" started between Dharma and Widmore. This conflict ended with the "incident", which basically damaged the mechanism that was used to control and harness the electromagnetism of the island. The results of this "incident" were: 1. Even though they were able to fix the mechanism, they would have to manually regulate it by typing in the code every 108 minutes.2. The uncontrolled release of the electromagnetic energy caused many people to get sick (or the were people that were already sick that had been "cured" by the island) Shortly after this problem, both parties (government/widmore) lost interest in the project (perhaps some of the powers were lost, Charles Widmore died, the government stopped funding it, etc), but due to the secretive nature of the projects on the island, and the fact that it is "hidden", the people involved in the project, on both sides, got left there. So when the survivors of the crash landed on the island, Desmond was the remaining Dharma "employee" (even though he is connected with the Widmores) and the others are what's left of the Widmore group. Things were going normally until Desmond turned the failsafe key. Turning that key basically destroyed the harnessing mechanism which will either make it so the island is permanently hidden or permanently visible (it may also "uncure" Locke, Rose and Sun).
Theory by Brent
