My best guess is that the island timeline is one in which Jacob stays in control, interferes in the Losties lives bringing them to the island so that one of them can take control once he dies, protecting the island and stopping Smokey from escaping. The ALT timeline is one in which Jacob didn't interfere, no candidate was chosen and the island is somehow underwater. In this timeline Smokey would be free, so I believe it is ultimately his goal. How he is going to achieve such a thing I have absolutely no idea.
Things should start getting very interesting from now on in the sideways. I hope Eloise is explained at some point. She seems to know way more than anyone else. I think she doesn't want Desmond to proceed because she doesn't want the other timeline to become the main one because she knows she kills her son in it.
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