SPOILER
When he reaches the lighthouse and finds no evidence of the lobotomies he is confronted by Dr. Cawley. Cawley explains to him that he himself is a mental patient on the island. His friend Chuck was actually his personal psychiatrist Dr. Sheehan. It is revealed that Teddy was a U.S. marshal until he came home one day to find his wife had murdered their three children. Out of sadness and despair he kills his wife and goes insane. His mind created a fantasy world where he was still a marshal coming to investigate Shutter Island. He is cinvinced when shown that Edward Daniels is an anagram of Andrew Laeddis and Rachel Solando is actually an anagram of Dolores Chanal. He excepts these facts but the next morning he relapses and calls Dr. Sheehan Chuck. Thus proving he is still insane and needing to be lobotomized.
Scanotroner gives it
Shutter Island
awful <--------------------------------------------------------Good--> not awful