A lot of the details have been left vague, but I think we can surmise some things (off the top of my mind):
* The island has a huge pocket of electromagnetism at it's core, stronger that anywhere else (that we know of).
* Electromagnetism can be used to heal people, as claimed by the australian healer (played by Farscape's Scorpius) who Rose went to see. He said he protected/used a (much, much smaller) pocket of electromagnetic energy somewhere in australia's outback. This is how the island heals people.
* The electromagnetism seems to be strong enough to bend time and space as evidenced by the Dharma experiments. Explains the time travel and donkey wheel shenanigans.
* When people interact directly with the electromagnetism we see the light (like when Ben used the frozen donkey wheel or when Desmond didn't put in the numbers). So the light is the energy or is a byproduct of the energy.
* The temple had a healing pool. The waters from the light caves make you immortal. Maybe the light cave stream is the source of the pool's waters or maybe they come into contact to the energy from a less concentrated place.
* The australian healer claimed he controlled/channelled his pocket's energy. Maybe Jacob can do the same, which might explain how he brings people to the island.
* Some people are special in different ways. Like Walt with his Omen thing, how Hurley and the Man in Black could see dead people, Miles can speak to the recently dead and Desmond has a resistance to the energy. This may or may not be connected to the energy. Desmond at least probably is, Hurley didn't see dead people before he came to the island.
* The incredible series of coincidences that connect all the Losties together could be, like claimed by many (Locke, Eko, Jack in later seasons), fate or it could be Jacob's machinations.
As for the alternate timeline, the numbers or whatever happened to create the Smoke Monster, I have no idea.