Sky Island is an island that floats in the sky.
Trot, Cap'n Bill, and Button-Bright set out with a flying Magic Umbrella from California to picnic on a nearby island. The real name of the island was difficult to pronounce, so they called it Sky Island. But the umbrella passed by that island and flew to the magical floating island in the sky.
They landed on the blue side of the island and were imprisoned by the Boolooroo, who took away the Magic Umbrella.
The travelers escaped through the Fog Bank to the Pink Country where Trot was eventually made queen. Knowing they needed to retrieve the Magic Umbrella to return home, they assembled an army of two hundred Pinkies to march through the Fog Bank and attack the Blueskins.
Using a magic ring which made her invisible, Trot captured the Boolooroo and became "Boss of the Blues". She allowed Ghip-Ghisizzle to take his rightful position as the new Boolooroo, sent the Pinkies home to the Sunset Country, and found the Magic Umbrella, allowing the travelers to return home to the earth. (Sky Island)
Baum had a penchant for creating divided countries; they come in two or four parts. The Island of Yew is divided into four segments in the cardinal directions, like the Land of Oz. Oz and Sky Island are the two of Baum's divided countries that have distinctive colors associated with their parts.
This pattern can be traced further in Baum's canon. In his story "The Tiger's Eye," probably written in 1905, the island of Pocofo is divided in two, one half dominated by wild jungle animals and the other by native humans.