Dalton was originally the overseer of the construction but it was passed to the Prophet. The point of the shrine was to be closer to Lavos in order to extract his power, and Queen Zeal ordered the Mammon Machine to be moved to Ocean Palace. Zeal forced Schala to control the machine to draw Lavos power, but Crono and his companions interfered and attempted to fight Lavos but lost. After Crono sacrificed himself to save Schala, the amount of power generated by Lavos started to destroy the Ocean Palace, which later transformed into the Black Omen.
Technically it is not necessary to lose the fight with Lavos at the Ocean Palace; however, winning this fight at this point in the game is nearly impossible. This is the hardest ending to achieve; doing so causes the names in the credits to go by extremely quickly because of the speed with which the player has "beaten" the game. If one wishes to continue the story farther, losing to Lavos does not result in a Game Over.
In Chrono Cross, when the Ocean Palace Incident occurred in the new timeline Crono created, Schala was left behind and engulfed in a dimensional distortion that took her to the Darkness Beyond Time. The Mammon Machine was also temporarily shifted with her, though apparently returned to the normal world.