Uh, anyone could answer?
It's both, really. It's about people being lost at sea, and the psychological effect it has on the titular lighthouse keeper. The album
Pawn Hearts, of which APoLK is the last track, deals with similar themes (for instance, the first track, Lemmings - mistakenly believed to be creatures driven to mass suicide - , is referenced in APoLK, tying the whole album together), and if you look at Peter Hammill's lyrics as a whole, you'll see recurring themes of death, loss, and separation running throughout.
For a real mind-f*ck, I recommend the VDGG album
Godbluff, which is possibly the darkest example of Prog Rock in existence!