The man has a muscular torso, a stocky build and bends his tanned fingers like date palm leaves. The beach nearby is being buffeted by wind. He prods searchingly, one finger at a time, at a recently acquired keyboard. The situation seems to be a computer salesman's wet dream; but despite appearances, this is not a cynical marketing ploy. A group of technocrats from the Continent have brought the web to one of the world's most remote places, and with it, changed the lives of an enigmatic people few of us have heard of.

This sun-scorched territory is Tokelau, comprising three coral atolls in the middle of the Pacific. Recently, its internet connections have been upgraded by a business established on the other side of the world. And today in London, a new online venture, Dot TK, was launched.

The brainchild of Joost Zuurbier, a Dutch businessman, the company offers free domain names – namely, website addresses – with the suffix ".tk" to its customers. This came about because of a deal struck with the inhabitants of Tokelau, one of the few places in the world that does not use its allocation of domain names from Icann, the American "coordinators" of every address on the World Wide Web. Dot TK gave the Tokelauans internet technology; in return, they granted it permission to use their domain names.

"We are so isolated in Tokelau. We could not use all of our allocated names so we were approached by this company; at least they might be able to get some proper use out of them," says Ionatana O'Brien, Tokelau's telecommunications minister, who is on his first visit to London.

The islands are almost equidistant between Hawaii and New Zealand, but it is officially a non-self-governing territory of the latter. Potential tourists need to get to Apia, the Samoan capital 500km to the north, before waiting up to two weeks for a crowded boat to continue their passage. Visitors would then spend two days on choppy seas before arriving at their destination. If they are lucky, the residents, which numbers no more than 1,500 across all three islands, might lay on a greeting party. But what is more likely is a glimpse of the "cleanest pigs in the world", farmed in pens on the beaches, and helpfully washed by the sea.

Until 2001, the islands only had a handful of telephones, and a dozen laptops. The computers' dial-up speed was an excruciatingly slow 9kB/s. But it wasn't long before the technological gap was filled by Zuurbier, a Dutch internet entrepreneur and now Dot TK's chief executive.

He had set up his own business in 2001 and had put together a business plan to give away free internet domain names to clients. The plan was to sell advertising space on the client's websites, with domain names supplied by him. Zuurbier was spurred on by the success of Hotmail, which had achieved something similar with email addresses. In order to acquire a suffix to sell – such as .com, .co.uk and .biz – he had to identify those which were not already in use. There were 224 extensions in use when Zuurbier began his business plan, including country codes such as .co.uk and .fr. At that time only five countries were not using their suffix allocations, including the Palestinian Authority (.ps) and Tokelau. The former is a war-torn land that many in the international community still refuse to acknowledge. The latter was a secluded beach paradise with a penchant for ball sports. In terms of doing business, it seemed like a no-brainer.

"I searched online and couldn't find anything on the islands – it was as if they didn't exist," says Zuurbier. "I knew it was a colony of New Zealand, so I called up the Dutch ambassador there and it took all his efforts to finally get us in touch with the authorities in Tokelau."

The idea was originally to convince them to let him use their domain allocation in exchange for cash. It was only later that facilities and training in internet technology for the islanders became part of the plan.

Zuurbier began the uphill struggle of explaining to the people of Tokelau what the internet was, using the most efficient means of communication available to them: the fax. He painstakingly described what the technology could do: the thrill of email, the majesty of eBay, the tragedy of Amazon (they don't deliver there).

Zuurbier explains: "I felt it would be extremely cool if this venture was going to work. In the last 15 years I have visited probably 20 small island nations, especially in the Caribbean. When meeting the people of Tokelau in [the mutually convenient meeting place of] Hawaii for the first time, my curiosity about their way of living only went a level higher."

In many ways, life in the territory is Westernised. Its people speak English, and are educated in New Zealand before returning home to start a family. But in other respects, the islands remain resolutely primitive. People there have a life expectancy of 58 – primarily because of the poorly staffed hospitals, according to Zuurbier. Diabetes is rife and many residents are obese. If the country – which may not exist in 50 years due to rising sea levels – was ever to improve its standard of living, it would need to embrace modern communications in order to get hold of medical aid when it was urgently needed.

To hammer his message home, Zuurbier sent two of his friends, Eline la Croix and Balder Alofs, to Tokelau in 2001 to meet the people and show that he was someone who could be trusted. The pair took 20 hours of video footage during their trip to the remote islands.

"We were representatives of the Dutch people," says la Croix. The pair spent eight days travelling between the three islands, meeting the chiefs or governmental leaders of each one. She explains that the inhabitants seemed to have little to do – with no shops, no bars and no discos. The couple attended a party one evening and the only entertainment was a single cassette of Nineties dance music being endlessly replayed on a beachside boombox. At night, the men would recount stories of their fishing exploits – one told her how he had caught a 5m-long shark with his bare hands. Their lives were dominated by the physical demands of hunting for food.

Won over by the Dutch couple's charm and the promise of new high-speed IT links, the Tokelau people signed a contract to hand over responsibility for their domain names to Dot TK. In 2003, Icann contacted Zuurbier and told him that in order to be selling their wares, the Tokelau people needed a reasonable amount of access to the internet – something they had been denied access to. So, with the help of a freight ship and some equipment from Bangkok, Zuurbier and a colleague set up the country's first satellite-mediated broadband internet connection. The network is powered by oil generators and solar power, and currently gives up to 384kB/s of bandwith.

Tino Vitale, general manager of the islands' communications company Teletok, says that the connection had overhauled the way his fellow islanders lived their lives. The number of computers in use had expanded to more than 100. Residents now regularly read newspapers, use email and follow sport. "We have had doctors coming over from Germany to work in our hospitals who have read about the island online, something we weren't able to do before," he says. "We can also market important parts of our culture, such as handicrafts, which is a big deal for us."

Since Icann approved the use of the .tk domain, more than 1.6 million sites have been registered. Zuurbier declines to disclose the full details of the scheme, but it appears that his firm is making a tidy profit.

The story does not have a fairy-tale ending, however. Alofs, who accompanied la Croix on her scouting mission, died in February, aged only 30, from a brain aneurysm.

"I felt devastated," says Zuurbier. "But after some time you begin to realise that taking a little more risk is not that bad; life is very, very short. With Balder's positive mindset, the rest of the team and myself went ahead and started to execute our plans. And here we are. I am very proud of our entire team that we got this done. Balder's spirit must be still around us, somewhere."

Maybe even back in that Pacific island. Here, its denizens now play with computers, as well as joke about their fishing successes, late into the night.