The whole playing area is like some kind of plateau to me

Which means the crater edge is essentially all around you

So its like inverted?

Black = playing area

Blue = crater edge

yes, the PA is surrounded by the Crater's Edge, not how the picture shows.

It's a different kind of volcano. Large aquatic volcanos often form a caldera, which is probably where the playing area is.

Or possibly, geographical movement due to the size of the volcano caused it to move up, the walls collapsed, which formed an island. More likely, it could just be a formation of magma.