A translation of a concept art page from Hyrule Historia. Images taken from History of Hyrule’s The Legend of Zelda art anthology. This page was translated by Patas.
Skyloft & the Islands in the Sky
All the human beings live on the islands floating in the sky. They’re so high up that not even birds, except for Loftwings, can get close. They worship the goddess and live peacefully.
“Since the game has a fantasy setting of people living in the sky, we ventured to create a city that could not exist in the real world. We worked on the shades of the houses and the decorations with the keywords “sky, wind, peace” in mind. Since the sky is too high, there are no other birds besides the Loftwings. And that’s why people get so surprised when they see the small birds living on the surface.”
(Hisada, Designer)
Offical Illustration of Skyloft
It seems there were many designs for Skyloft, like having a series of small islands connected by narrow bridges, or terrain with many height levels. On the left-most design, there’s a castle-like building.