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The island was seized from Denmark in 1807 after Napoleon had imposed the Continental system against the British. It was a useful base to monitor the ports of Germany, Denmark and Holland from. The British Admiralty was reluctant to give up such a strategically located base and so kept it as part of the 1814 Treaty of Kiel.
The island was traded away in 1890 as part of an elaborate trade for influence and control in Central and Eastern Africa. Basically, Britain received primacy in Uganda, Kenya, and Zanzibar in return for the small island. At the time, the British were extremely happy with the trade, but with hindsight it would have been a useful base to monitor the German fleets, especially after the construction of the Kiel Canal. The trade was a good example of Bismarck using German Imperial claims as bartering chips to advance their true interests back in Europe.
The islands would actually return to British control from 1945 to 1952 as forces occupied it in the latter stages of World War II.
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