Floating Island

Both sit on cloud blocks high above the ground and both look identical from underneath. An island carries a chunk of isolated forest and a small building. A lake is water and nothing else, with no structure and no chest. Every world has at least one island, up to six on a large one, and lakes sit outside that count.

The ordering matters if you are trying to work out how much sky is left to search. Lakes only generate once the world has placed every island it intends to, so a single floating lake proves the world already has its full set: three islands on a small world, five on a medium, six on a large.

The building holds exactly one Skyware Chest, and its headline item is not random until the world has placed one of each of four. Generation hands out a Shiny Red Balloon, then a Starfury, then a Lucky Horseshoe, then a Celestial Magnet, in that order, and only islands past the fourth roll freely from the same four. On any world with four or more islands, all four exist somewhere, so clearing the sky is a complete early accessory package rather than a gamble.

Two extras ride along. A third of these chests hold a Sky Mill, the station that lets you craft cloud blocks and the sky themed furniture. One in forty holds Fledgling Wings, and wings before Hardmode change the feel of an entire run. That single line is why some people check every island in the world.

Occasionally an island generates with no room and therefore no chest, and occasionally with a room but nothing in it. That is normal, not a bug.

Islands sit up in the top sixth of the world and nothing marks them. Ranked roughly by how little setup each method needs:

• Look at the ground. Water spilling off an island lands somewhere, so an unexplained small puddle on the surface usually has something directly above it.
• Watch where Fallen Stars never land. Islands catch them, so a stretch of surface that stays empty overnight has a roof.
• Fire something that bounces. A gun loaded with Meteor Shots aimed straight up returns a ricochet if there is anything solid overhead.
• Build a sky bridge. Rope or a staircase up to island height, read the altitude off a Depth Meter, then lay dirt or hay sideways until you hit one. Slow, thorough, and it always works.
• Drink a Gravitation Potion and fly the sky by flipping your own gravity, no wings required. The Gravity Globe does the same thing permanently, much later.
• Once you have one, stand on it and use a Teleportation Potion. Those land you on another island far more often than chance would explain.

Height brings its own spawns. Harpies arrive in pre-Hardmode and are mostly a nuisance while you are trying to build. Wyverns replace them in Hardmode and are not a nuisance at all: a long segmented worm that hits far harder than whatever you are wearing when you first go up, and it will find you within seconds of your arrival. An early Hardmode sky trip needs a plan for one or a very fast way down.

Gravity is weaker at that altitude, so jumps float and control feels loose. The fall to the ground is still lethal without a Lucky Horseshoe or better, and you will be doing a lot of jumping between cloud edges.

The Skyware building becomes valid NPC housing the moment you add a light source, and an island is a natural quarantine: a patch of forest that Corruption or Hallow cannot creep into along the ground. It can still be converted if one of the diagonal Hardmode stripes happens to pass through it, so choose one off to the side if you are planning around that.

Meteors will not land on one either, because cloud and sunplate blocks count heavily against any crash site the game considers.

Floating lakes exist to be fished. Water that high counts as sky fishing, which is the only source of Sky Crates, Azure Crates, the Damselfish and a handful of quest catches. Check the altitude before you commit: a lake that generated too low, which happens more often on large worlds, gives ordinary surface catches instead and no amount of patience will change that.