Darwin explained the creation of coral atolls in the South Pacific (1842) based upon observations made during a five-year voyage aboard the HMS Beagle (1831–1836). His explanation, which is accepted as basically correct, involved considering that several tropical island types—from high volcanic island, through barrier reef island, to atoll—represented a sequence of gradual subsidence of what started as an oceanic volcano. He reasoned that a fringing coral reef surrounding a volcanic island in the tropical sea will grow upwards as the island subsides (sinks), becoming an "almost atoll" (barrier reef island) (as typified by an island such as Aitutaki, Bora Bora and others in the Society Islands). The fringing reef becomes a barrier reef for the reason that the outer part of the reef maintains itself near sea level through biotic growth, while the inner part of the reef falls behind, becoming a lagoon because conditions are less favorable for the corals and calcareous algae responsible for most reef growth. In time, subsidence carries the old volcano below the ocean surface, but the barrier reef remains. At this point, the island has become an atoll.
Atolls are the product of the growth of tropical marine organisms, so these islands are only found in warm tropical waters. Volcanic islands located beyond the warm water temperature requirements of reef building (hermatypic) organisms become seamounts as they subside and are eroded away at the surface. An island that is located where the ocean water temperatures are just sufficiently warm for upward reef growth to keep pace with the rate of subsidence is said to be at the Darwin Point. Islands more polar evolve towards seamounts or guyots; islands more equatorial evolve towards atolls (see Kure Atoll).
Reginald Aldworth Daly offered a somewhat different explanation for atoll formation: islands worn away by erosion (ocean waves and streams) during the last glacial stand of the sea of some below present sea level, developed as coral islands (atolls) (or barrier reefs on a platform surrounding a volcanic island not completely worn away) as sea level gradually rose from melting of the glaciers. Discovery of the great depth of the volcanic remnant beneath many atolls (see Midway Atoll), favors the Darwin explanation, although there can be little doubt that fluctuating sea level has had considerable influence on atoll and other reefs.
The distribution of atolls around the globe is instructive: most of the world's atolls are in the Pacific Ocean (with concentrations in the Tuamotu Islands, Caroline Islands, Marshall Islands, Coral Sea Islands, and the island groups of Kiribati, Tuvalu and Tokelau) and Indian Ocean (the Atolls of the Maldives, the Laccadive Islands, the Chagos Archipelago and the Outer Islands of the Seychelles). The Atlantic Ocean has no large groups of atolls, other than eight atolls east of Nicaragua that belong to the Colombian department of San Andres and Providencia.
As noted above, reef-building corals can thrive only in warm tropical and subtropical waters of oceans and seas, and therefore atolls are only found in the tropics and subtropics. The northernmost atoll of the world is Kure Atoll at 28°24' N, along with other atolls of the Northwestern Hawaiian Islands. The southernmost atolls of the world are Elizabeth Reef at 29°58' S, and nearby Middleton Reef at 29°29' S, in the Tasman Sea, both of which are part of the Coral Sea Islands Territory. The next southerly atoll is Ducie Island in the Pitcairn Islands Group, at 24°40' S. Bermuda is sometimes claimed as the "northernmost atoll" at a latitude of 32°24' N. At this latitude coral reefs would not develop without the warming waters of the Gulf Stream. However, Bermuda is what is termed a pseudo-atoll because its general form, while resembling that of an atoll, has a very different mode of formation. While there is no atoll directly on the Equator, the closest atoll to the Equator is Aranuka of Kiribati, with its southern tip just 12 km North of the Equator.
In most cases, the land area of an atoll is very small in comparison to the total area. According to , Lifou (land area 1146 km²) is the largest raised coral atoll of the world, followed by Rennell Island (660 km²). More sources however list as the largest atoll in the world in terms of land area Kiritimati, which is also a raised coral atoll (321.37 km² land area; according to other sources even 575 km²), 160 km² main lagoon, 168 km² other lagoons (according to other sources 319 km² total lagoon size). The remains of an ancient atoll as a hill in a limestone area is called a reef knoll. The second largest atoll by dry land area is Aldabra with 155 km².