In the allegory of Lord of the Flies, the island is apart from civilization; thus, it affords the Rousseaean experiment. For, if society is what corrupts man who is naturally good, according to Rousseau, then the boys should remain innocent on the island, a sort of Garden of Eden.
Because the boys do not remain innocent, and, instead, descend into savagery, Golding dispels the Theory of Natural Man purported by Rousseau. Man is not naturally good; he is inherently evil, Golding implies.
The island is also quite a neat and clever way to organise the plot, control events and limit too many complications to the story of 'Lord of the Flies' by William Golding. Quite apart from the imaginative and symbolic features, it is quite a practical idea for an author. For example it rules out the possibility of too many loose ends - boys going missing, crossing borders into other countries, getting rescued one by one by different people and so on.
I think the most important thing about the island is that it allows the basic story to happen. In order for Golding to tell the story that he wants to tell, he has to have the kids be isolated from the adult world with the possiblity, but not the certainty, of rescue. This is most easily accomplished by putting them on an island.
In addition, having them on a tropical island makes it more plausible that they would be able to survive without adult help or much technology.
As in most any story, the setting plays a role that contributes to the overall message. Golding uses this tropical setting to mirror previous works (see link below and look under setting) that portrayed the idea that a tropical paradise would be a great escape. However, for these boys, the escape demonstrates that they will just become a microcosm of their own previous society. Sides form to all issues, the ability to work together is a struggle, and people hurt people and miss messages. Sound familiar? Yes, indeed all of these things happen in real life. Golding uses this setting to portray that even though everything seems calm and peaceful, it often really is not.
All these suggestions are perfectly acceptable, but I'd even go as far to say that the Island does in fact provide a parallel to the largely romanticised, imperialist, optimistic novel 'Coral Island' by R.M. Ballantyne. Whereas in that novel the children stranded on the island encounter and defeat evil, through William Golding's eyes, it would have been very different in reality - the boys, instead of facing evil, have the innate human 'darkness' inside them. The island is a way of giving the reader a chance to compare the two story-lines in the same setting and decide which one is more plausible.
The reason they are set on an island is significant because, for the boys, it becomes a type of battle ground, and symbolises the world.