The island has carried several names. In Gaelic it has been called Creag Ealasaid — Elizabeth's rock — though scholars consider this a folk etymology overlying a much older and less transparent root, possibly meaning 'cliff of the Saxons'. To Irish labourers travelling between Belfast and Glasgow in search of work, Ailsa Craig was 'Paddy's Milestone': the halfway point of the sea journey, the great visible marker that told them they were exactly halfway home or halfway abroad. The name carries an ethnic edge from the period when 'Paddy' was used as a slur, but it also carries the affection of generations of Irish workers who watched the island slide past and counted off another voyage. Ailsa Craig is roughly 10 miles west of Girvan, around 2 miles in circumference, and rises to a height that makes it a dominant feature visible from much of the Ayrshire coast — and, on very clear days, from peaks 70 miles away.

The island is the remains of a magmatic pluton — a body of igneous rock formed deep underground, exposed by the slow erosion of softer material around it. It was part of the same period of igneous activity that produced the granites of nearby Arran. Ailsa Craig microgranite occurs in three varieties: Blue Hone (unique to the island, and now mostly worked out at the surface), Common Green (used for the body of curling stones), and Red Hone (similar to Blue but now exhausted). The Ailsa Craig Granite Company built a narrow-gauge railway to the quarry at Kennedy's Nags in 1909, hauled granite blocks to a crusher near the south foghorn, and shipped product from a quarry pier — financially troubled almost from the start, the company effectively closed in 1928. Today the firm Kays of Scotland holds exclusive rights to Ailsa granite. A 2,000-tonne harvest in 2013, after an 11-year hiatus, was projected to last until at least 2020; another harvest was held in winter 2020. Environmental restrictions now prohibit blasting on the island.

In the late 16th century, during the upheaval of the Scottish Reformation, Ailsa Craig became a refuge for Catholics who had no safer place to practise their faith. In about 1587, the prominent Catholic Lord Maxwell landed on the island while escaping his pursuers, found a fishing boat, and tried to reach Crossraguel Abbey on the mainland — he was captured. In 1597, Hugh Barclay of Ladyland seized control of the island with grander intentions: he planned to make Ailsa Craig a safe place for Catholics, a stopping point for a Spanish invasion that would restore the Catholic faith in Scotland, and a provisioning base for the Catholic Earl of Tyrone fighting in Ireland. The Protestant minister Andrew Knox discovered the plan. By one account, Barclay drowned himself rather than face capture; by another, Knox and nineteen others ambushed him on the shingle beach and he died trying to defend himself before being forced back into the sea. Either way, the plot ended in his death.

The Ailsa Craig Lighthouse was built between 1883 and 1886 by Thomas and David Alan Stevenson — of the Stevenson lighthouse engineering dynasty; Thomas's son Robert Louis would become the famous novelist. It stands on the east coast facing the Scottish mainland, owned by the Northern Lighthouse Board. Two substantial foghorns with concrete housings were built in 1866, one at the north end near the Swine Cave and one at East Trammins on the south end, both powered by compressed air piped from the lighthouse. They were decommissioned in 1966. A Tyfon fog signal carried on until 1987, when improvements in ship navigation made even that redundant. Peter Hill's 2003 memoir 'Stargazing: Memoirs of a Young Lighthouse Keeper' features Ailsa Craig prominently. Other surviving structures include a 16th-century ruined tower house, built by Clan Hamilton to defend the area from possible Spanish invasion under Philip II — the same broader Catholic-Protestant struggle that drew Hugh Barclay to the island a few years later.

Ailsa Craig is today a bird sanctuary, leased by the Royal Society for the Protection of Birds until 2050. A large colony of gannets nests on its cliffs, the same birds that — in the days of Robert Burns, whose maternal uncle Samuel Burns was involved in the trade — were hunted annually for the flesh, which was considered a delicacy. For most of the 20th century, the puffin population was effectively gone. Rats had reached the island from shipwrecks (a sunken coal boat is the first culprit named in the records), and they devastated the ground-nesting birds. The puffins disappeared as a breeding species. A long campaign using new techniques eradicated the rats in 1991, and the puffins gradually returned. They are now raising young on the island again. The change has rippled through the whole flora and fauna — slowworms, gannets, kittiwakes, all benefit from a rat-free landscape. As of 2020 the island remained owned by David Kennedy, 9th Marquess of Ailsa.