In classical and medieval literature, ultima Thule (Latin “farthermost Thule”) acquired a metaphorical meaning of any distant place located beyond the “borders of the known world”.
[…] The Greek explorer Pytheas of Massalia (now Marseille, France) is the first to have written of Thule, after his travels between 330 and 320 BC. Pytheas mentioned going to Thule in his now lost work, Things about the Ocean Τὰ περὶ τοῦ Ὠκεανοῦ (ta peri tou Okeanou). He supposedly was sent out by the Greek city of Massalia to see where their trade goods were coming from. […]
The first century BC Greek astronomer Geminus of Rhodes claimed that the name Thule went back to an archaic word for the polar night phenomenon – “the place where the sun goes to rest”.
[…] Another hypothesis, first proposed by Lennart Meri in 1976, holds that the island of Saaremaa (which is often known by the exonym Osel) in Estonia, could be Thule. That is, there is a phonological similarity between Thule and the root tule- “of fire” in Estonian (and other Finnic languages). A crater lake named Kaali on the island appears to be have been formed by a meteor strike in prehistory. This meteor strike is often linked to Estonian folklore which has it that Saaremaa was a place where the sun at one point “went to rest”. […]
In the early seventh century, Isidore of Seville wrote in his Etymologies that:
Ultima Thule (Thyle ultima) is an island of the Ocean in the northwestern region, beyond Britannia, taking its name from the sun, because there the sun makes its summer solstice, and there is no daylight beyond (ultra) this. Hence its sea is sluggish and frozen.
Source: Thule – Wikipedia