Most of the island reflects the conflict that exists between its past as a port for pirates and its present status as a part of the Arachnos organization.
(From the official website)
In the days before Arachnos, Mercy was a lone town resting on the low banks of a large island.
It was home to some fishing outfits and more than a few wintering pirates, but frequent disappearances and tales of bizarre snake-like creatures kept the population to a minimum.
Lord Recluse claimed this lonely spot of land shortly after his rise to power. Fort Cerberus was erected and patrols dispatched to discover the truth of these “snake-men.”
The creatures were found in great numbers, but Arachnos’s overwhelming firepower quickly pushed them back into their warrens.
Over the next decade, Mercy grew and the snake-men were forgotten. They were far from dead, however. They had simply retreated deeper into the bowels of the earth.
Lord Recluse knew full well the “Snakes” remained, but he was content to leave a few survivors for future study and possible use in his plans of world conquest.
The Rikti War and the many opportunities it presented changed Recluse’s focus in the new millennium. The Snakes were forgotten and allowed to multiply. A year after the Rikti defeat, they rose from their warrens and rampaged through Mercy.
Arachnos repulsed the mutants, but Lord Recluse mysteriously — and quietly — left the lower end of the island to the Snakes. The creatures had proved quite powerful, and he felt they could be studied and put to use in many of his secret operations.
The Snake-infested area of Mercy also provided Lord Recluse with another useful purpose—a proving ground for super-powered beings. Those with promise are brought here and tested with a series of tasks to determine whether they have what it takes to survive.
Those who do are tracked for possible recruitment into Arachnos’ ranks. Those who don’t are left to fend for themselves, becoming prey to the stronger.
Much of Mercy Island was devastated in the 2002 Rikti Invasion. The parts of the island that were inside the walls of Fort Cerberus were quickly rebuilt, while those areas outside of the walls were left to rot. A second base dubbed Fort Darwin was later created at the northeast corner of the island to serve as a landing point for newly-arrived recruits, most of which were brought over from the Zigursky Penitentiary in Paragon City.
In September of 2011, Fort Darwain was taken over by members of Longbow. New arrivals are now taken directly to a new staging area at the entrance to Fort Cerberus.
(Please see its Paragon Wiki entry for more information.)
Ghost Widow keeps her tower on the island. It is here that she is mystically bonded to the Rogue Isles, giving it her strength.
Matthew Burke is still there, although his favorite contact position had to be moved from near Fort Darwin to within the Mercy walls.