Skyloft

Skyloft is a series of large islands floating above the clouds in Skyward Sword. The main island includes the Bazaar, a large residential quarter, a bathhouse, as well as a plaza and light tower. Other places among the other islands are the Knight Academy, a boarding school run by Gaepora that Link and Zelda attend along with a several other students and a large statue of the Goddess Hylia. It also serves as the home to the sacred blade: the Goddess Sword.

Features
Skyloft is a set of floating islands in the sky and is inhabited by humans who descended from those who lived among the Goddess Hylia. The citizens of Skyloft are noted for tranversing the sky by riding large birds of varied colours. The floating civilization is home to a number of notable features including the Bazaar, the Knight Academy, the Waterfall, the Statue of the Goddess, Beedle's Air Shop, a graveyard and a large number of households. During the day, Skyloft is full of life, but becomes infested by Keese, Chuchus, and Remlits during the night as result of Batreaux's curse.

History
Skyloft was created at the end of the Era of the Goddess Hylia when a crack in the earth appeared, and from the fissure came Demise and his demonic hoards. They launched a massive assault on the world known as the Surface, burning forests to ashes, choking the land's sweet springs and killing without hesitation. Hylia, in order to protect her people, gathered them on a small outcropping of land and sent them skyward as a means of protecting them and the sacred Triforce, from the demonic hordes that had overrun the surface world.

In order to keep it from falling into the hands of Demise, Hylia also hid the portals to three pieces of the Triforce within Sky Keep, and enshrined the Goddess Sword inside the Statue of the Goddess, to be found by a chosen hero when the time was right. Skyloft remained in the sky above the clouds for generations, knowledge of the Surface and the origins of Skyloft becoming nothing more then a mere legend. Despite knowledge of their origins dwindling, however, the present people of Skyloft still knew of the Goddess Hylia and believed she watched over them to that day, unaware that she was living among them in a mortal form in what was now known as the Sky Era.

25 years prior to the events of Skyward Sword, the people of Skyloft established the Knight Academy, a school for the Knights of Skyloft, and the Wing Ceremony, an annual yearly event where students at the Knight Academy would engage in the ceremony to advance to their next level in class. It concludes with the winner reenacting the role of the Goddess's Hero from long ago with another student playing the role of the Goddess herself. In the present events of the story, Link goes up against Cawlin, Strich and Groose in the ceremony, winning and getting to spend personal time with Zelda, playing the role of the Goddess and giving him the Sailcloth she made. As she is about to tell Link something personal that has been on her mind, she is swept away to the surface world by a tornado conjured by Ghirahim. Link wakes up, seeing a figure, later known as Fi, and begins to follow the figure into the interior of the Statue of the Goddess. Upon entrance, the figure reveals itself to be Fi, and instructs Link to pull out the sacred Goddess Sword and raise it skyward. After Link raises the sword, Gaepora walks in, and Fi gives Link the Emerald Tablet, and instructs him to place the tablet into the alter. As an effect of the tablet, a rift in the clouds forms, revealing a path to The Surface, where Fi says Zelda is located. Late in the game after learning the Song of the Hero from Levias, Link discovers the Sky Keep, an ancient temple that was built inside the Isle of the Goddess with the sole purpose of protecting the Triforce. After venturing inside and reciving the Triforce, he wishes for the eradication of Demise, and upon being granted the Isle of the Goddess breaks off from the remainder of Skyloft and begins to desecent towards The Surface. The isle settles in the large spiral pit in the Sealed Grounds, successfully sealing away Demise.

After Demise is successfully killed in the past, various people of the present day Skyloft including Gaepora, Cawlin, and Strich journey to the surface and seemingly discover their true origins. It would seem that, over time, people from Skyloft, like Link and Zelda, chose to stay on the surface world as, and by the time of the Force Era, many humans live on the surface world that has come to be known as Kingdom of Hyrule.

Theory
It is possible that Skyloft shares some connection with the City in the Sky seen in, given that both are floating islands populated by intelligent, advanced races.

Trivia

 * Sprayed on various walls across the town is the number '25', a reference to this game been released on the 25th anniversary of the Zelda series.