Death Island is a location somewhere on Halo. Obviously, it is an island somewhere in the middle of a large body of water. It has beaches and cliffs, and was inhabited by two teams in two bases (Red and Blue), much like Blood Gulch. It is the location of another simulation started by Project Freelancer that lasted years after the Project's end. Most of the simulation troopers never had a clue about Project Freelancer or the fact that they were a simulation.
When the Splinters rose up a few years after the end of the Project, one of the first things they did was investigate the leftover simulation and figure out how it lasted so long. They planted an undercover Splinter agent named Donnie for a few weeks before sweeping in and wiping the whole island out. Donnie's temporary lover and Blue Team's CO, Nikita, survived this attack and managed to terminate Donnie for his betrayal before Nevada fled the island.
Once Nikita was the only one left alive on the island, she used Doctor Dahl's experimental technology to teleport off the island and around various locations on Halo before arriving at Blood Gulch.