The episode is confusing, but once the final few scenes come on, you realize all the "Lostians" are dead. Even though they are very real, all together in that final scene in the church embracing each other, they are dead, attending their own funeral. Most died on the island, including jack in the very final scene, but for those who escaped, such as Claire, Kate, and even Lapidus, they eventually died to. Whether it be from old age, or anything else, they died. Something about the island brought them together though. Once they all died they were bound to meet again in this church, to say their goodbyes, and too move on.
It was a great ending to a great television show. Never has anything on T.V made me feel the way this show has. I loved it, and was emotionally attached to it. It's going to be hard to let go, as pathetic as that sounds.
Just a good quote from a friend, helping explain the death of everyone:
"Presumably, the afterlife is timeless and no one notices the difference in time between their arrival and the death of the others."
