Earth was where the Skylanders were banished to after the Core of Light was destroyed (in the console version of Spyro's Adventure). As a result of Earth bearing no magic, the Skylanders were shrunk and turned into toys. Earth is also the world where the new Portal Master lives.
At the end of the console version of Spyro's Adventure, Kaos was banished to Earth where he was soon tormented by a dog.
The Giants were banished from Skylands to Earth after they defeated the Arkeyans 10,000 years ago.
In the present, the Skylanders are still trapped on Earth in toy form; some having been put inside a display in a toy store called Super Toy Planet. Kaos, however, broke free of his frozen state due to his status as a Portal Master and used a Portal of Power on a toy display to return to Skylands.
Glumshanks refers to Earth as the Portal Master homeworld, indicating that humans and possibly other species in Skylands originated there. It also implies that certain entities in Skylands know all about Earth.