WMG: Sonic the Hedgehog: The Movie

In the part where he 'held up a finger' it was supposed to look like it could be either one
So they could get Crap Past the Radar.

This takes place in an AU where the Space Colony ARK fell.
Hence why the planet is ruined. The only reason why there's even an Earth is because somebody managed to remove the Emeralds before the colony hit the planet. The reason for the world of the Sky is because of the Chaos Emeralds.

Planet Freedom is actually Earth, After the End.

1. The Land of Darkness resembles New York City, and is referred to as "The Ancient Relics".

Wild Guessing:

2. Survivors of the cataclysm, utilizing some type of magic, managed to raise continents into the sky (This also explains why the continents can be destroyed so easily: they were never meant to be there).

3. An unintended side-effect of raising the continents was the creation of the warp zones.

4. Once the continents were raised, the survivors sealed off the surface world with a massive layer of clouds. The entrance was created by Dr. Robotnik blasting his way through.

5. The cataclysm was caused by a powerful demon and/or a demonic army. Since this was presumably thousands of years ago, everybody's pretty much forgotten. Robotnik, after living in The Land of Darkness for awhile, discovered this and used it as inspiration for his Metal Robotnik facade.

6. All of this, and more, would've been explored had the anime been picked up.

Planet Freedom and Arcadia are one and the same.

Both have inhabited Floating Continents and a desolate, uninhabited surface. The two areas are separated by a thick cloud layer, which can only be crossed through a vortex. Said vortex has a very chaotic environment and will destroy most ships.