We get a sample of what The Factory is about from Carlton Cuse:
"In order to gain more control over them, the Redhats even try to forcibly separate loved ones, order shoot-on-sight curfews and in the end send the guilty to the Factory. "
-Colony Executive producer Carlton Cuse
The Factory may be mining Helium-3 mining, as that is available on the moon and has been theorized to be a source of rocket fuel. This would answer why the Hosts would desire it.
The Factory, as discovered in the second episode of the third season, is used to make weapons.
Nothing is known about the history of The Factory. It was later revealed that the Factory is located on the Earth's moon. Carlos and other unknown humans have been seen working in the Factory, alive.
Later, the Factory is destroyed in an attack, when an unnamed enemy of the Hosts penetrated their defense grid. The Factory, all its inhabitants and personnel are gone.
- The way Carlos' group is processed when arriving at The Factory strongly resembles WWII film of concentration camps
- The set used for The Factory is the same set used in the 2009 Star Trek reboot film as the Enterprise's communications room.