The island is sort of like a very large Buddhist convention center - with many temples, monks and nuns. It basically was to honor Quan Yin....
The Cliff-Notes version of the story is in the 9th century a monk from Japan was moving a Quan Yin (goddess of mercy) statue from one mountain on mainland China to Japan – when a storm stranded him and the statue on Putuo Shan. Supposedly, the goddess spoke to him in a dream and told him to build a temple on Putuo Shan for him (at the time Quan Yin was a male Buddha but over time has sort of changed genders). Lots of monks and nuns live and study in the many temples on the mountain and this is a very popular pilgrimage place for the Chinese who are hoping for prosperity or safety.
Here is a longer version and more official ... http://www.chinadiscover.net/china-tour/zhejiangguide/zhejiang-putuo-history.htm
