Pony Island is officially described as a "suspense puzzle game in disguise". At the centre is an action game called Pony Island. It is a simple 2D side-scrolling game where the player uses the left mouse button to make a pony jump to clear gates as it moves forward by itself. Similar to the concept of Frog Fractions however, that is only a starting point for a much broader experience.

As the game breaks down, the player slowly delves deeper into the game that turns out to be an arcade machine devised by a sinister force. The player has to investigate the computer running the game, revealing secrets by manipulating items, text chatting with the creator of the game as well as an entity that wants to free the trapped souls, browsing documents and programs, logging into different accounts and so on.