1. The volume of ocean water increases, through the melting of glaciers or the end of an ice age. Scientists have confirmed that the rise in ocean levels have altered continent coast lines and flooded islands.
2. An earthquake could shear the base of the island, causing it to crumble. Islands are anchored on the seabed. Tectonic plates of the earth move under extreme pressure, so that a sudden joint or force could significantly alter the island's structural foundation.
3. Volcanic activity could have destroyed the island. Pacific Islands were created by volcanic activity, with the build up of cooled molten rock until the pile extends past the surface of the ocean. Likewise, a volcano can become active and its explosion force could have leveled an island.
The perspective that the island was underwater gave many viewers a sinking feeling that the series was taking a dramatic turn. It coincided with Flight 815 safely landing at LAX. At the time, what did that mean?
People immediately thought that the island events of the past five seasons must have been some sort of elaborate dream. For some who thought that, it was the jump-the-shark-moment. Other viewers theorized that the atomic bomb did go off, sending the characters back in time to moments before 815 crashed on the island. The bomb both re-set historical events, but also destroyed the island, sinking its artifacts to the ocean bottom. This theory was more palatable until the series continued to throw new current island events at us, including Juliet's apparent short-lived survival from the Hatch incident implosion. So some speculated that there had to be a separation of the characters story lines, i.e. a parallel universe was created which allowed the passengers to complete their voyage home to LA while at the same time, another universe kept the passengers trapped on the island. This would seem to be the closest explanation for what would finally occur in the end.
But it still left open questions. Because of LOST's extreme out-of-sync scene format, when did the island sink? Was it the jughead incident or was it after Hurley became guardian and he wrapped things up? Or was the island always under water, and it supernaturally trapped the passengers in a parallel universe? The show runners have never come out to explain the context of the sunken island.
So that leads to another possibility. The scene was inserted merely for "shock value." It was to confuse, divert and conceal the true meaning of the passengers landing at LAX so the final reveal that they were "all dead" could have the most impact.
