Floating Islands

Floating Islands are lansmasses in the sky. Just like in forests, you can find trees and grass growing over Dirt Blocks, with some Stone Blocks and Ores in the ground. They have a building made out of an ore type on them along with a locked gold chest that contains a special item such as Lucky Horseshoe, Shiny Red Balloon and Starfury and any other common item found in chests like arrows or coins (up to Gold Bars). A Golden key can be used to open the chests. In some case conjoined floating islands can be found. The heights are as follows:
 * Small World - Floating Islands are located around 400 feet above sea level, and in some circumstances are very close to large hills.
 * Medium World - they are generally found around 400 to 750 feet. The easiest way to find one is to move horizontally at about 480 feet.
 * Large World - they are located between 400-1200 feet. It is very difficult to find islands on large maps, due to the broad height range; the best option is to get a map viewer, so it's easier to spot them.

Strategy for finding Floating Islands
Using Meteor Shots is a good way as they bounce back if a floating island is hit.

A Space Gun can be used, shoot upwards and listen for the sound that it makes when an object is hit. A Star Cannon can be used in the same way.

You could shoot an arrow straight up into the air and if it comes back down already as an item or not at all, it will have hit something, which would very likely be your floating island, you can tell if it is already an item by hovering the mouse over it as it falls, and it will not make a sound when the item hits the ground. Another way to find a Floating Island is to look for places on the ground where dirt looks ripped off and the dirt background is left in place. Stack blocks up where you found the ripped ground and it is possible to find an Island. -Although it is not always
 * You can use a Water Bolt, and if it come back down then there is a floating island above you, though this is a slow alternative to meteor shots.

Using a large resolution can help in find Floating Islands