It's confirmed to reverse time. There's even a boat that does the same thing and return the sand desert into an ocean (I'm guessing the desert turns back into an ocean, aka Lake Hylia). I wish the crystal's power could also be reversed, turning it back to the present. Maybe a few puzzles could be based on having to turn some crystals to the past and some to the present. But it seems that the crystals can only be turned on and not off. On that thought, who even placed the crystals there?
One of the unsolvable mysteries of video game architecture and level design...
Also, as a reply to this:
I'm mostly intrigued to learn it was tropical before reverting into the wasteland. A very beautiful, colorful area before the sand overcame it.
It was explained that the people who used to live there overused the resources and killed the environment, turning it into a wasteland. It's similar to if we don't stop overusing our resources today, we're gonna be hurting ourselves in the future as the Earth would no longer be able to support us. (Wow, a huge lesson subtly given by Nintendo in an awesome game)