The Mortal Kombat tournament has been held here many times. In fact, this island was the setting for centuries of kombat and trepidation before the treacherous, shapeshifting sorcerer Shang Tsung while calling this island home, stole the Mortal Kombat tournament from the Shaolin order and corrupted it in order to win Earthrealm for his emperor, Shao Kahn.
It is possible that this stage is located somewhere close to the Yin Yang Island. That Island is also stuck between Earthrealm and Outworld.
In her non-canonical Mortal Kombat vs. DC Universe ending, it is revealed that Shang Tsung's Island is given over to Princess Kitana and her Edenian Resistance fighters who rename it "Argus Island" in honor of their god, Argus. They turn the island into a place of beauty and light which serves as a place of asylum for them in Earthrealm after Shao Kahn's defeat where they are sheltered from the eyes of mortals.