Sayid explains the compass's deviation from true magnetic north in ("Hearts and Minds").
Various anomalous phenomena exist around the Island that complicate the ability to navigate around and away from the Island. The DHARMA Initiative placed a sonar beacon just off the coast of the Island, which was used to guide their submarine.
The unique magnetic properties of the Island were first encountered by the survivors when Sayid's examination of Locke's compass showed a significant local deviation in bearings. It is likely that this deviation was caused by the electromagnetic pull of the yet-to-be discovered Swan Hatch.
Locating and traveling to the Island is difficult due to an unknown phenomenon that apparently causes travelers to experience a time dilation. This has been demonstrated by Daniel's experiment, the Helicopter's lost time, and the events surrounding Ray's death. Possibly this distortion is variable in nature as no such distortion appeared to take place on Sayid's journey to the Island via the Zodiac. ("The Economist") ("The Constant") ("Cabin Fever")
When traveling to the Island, one must stay on a particular compass bearing, lest they travel in circles and/or experience unsettling effects. Desmond's attempt to leave the Island by sailing due West was futile, as he ended up sailing in circles and back to the Island. Upon learning of the survivors' possession of a sailboat, Juliet showed knowledge of the difficulty of leaving, commenting that "sailing in circles will keep them busy".
Following instructions from Ben to follow a bearing of 325 from the Pala Ferry pier, Michael and Walt successfully left the Island. ("Live Together, Die Alone") ("There's No Place Like Home, Part 1") Daniel Faraday recognized the importance of following a single bearing to leave the Island, giving strict instructions to Frank Lapidus not to deviate from a heading of 305 degrees or risk "side effects". ("The Economist") ("The Constant") Sayid and Desmond knew to follow Daniel's instruction when returning to the Island from the Kahana. ("There's No Place Like Home, Part 1") ("There's No Place Like Home, Part 2")
It is theorized by Captain Gault that the Kahana's proximity to the unusual time differential effect around the Island was causing irrational behavior, including suicide, on the part of his crew. He likened this effect to a heightened case of "cabin fever". ("Ji Yeon") ("Cabin Fever")
The unusual behavior of ocean currents and tides may play a role in navigational difficulties. Michael and Sawyer were carried back to the Island on pieces of the raft after it was destroyed by the Others. ("Adrift") The tides rose dramatically on the beach in October of 2004, and seem to have remained at the higher level ever since.