Iliath Temple is using the interior that was originally designed for a different exterior. The interior can be seen in-game currently, as "TR_i4-261-hla Monastery".
Iliath may have been the site of a shrine to Azura and some ebony mines long in the past, but that is a question discussed among scholars. After the rise of the Tribunal it was established as an Ordinator war temple in which initiates received training -- both martial and theological -- away from civilization, and as Tiber Septim turned his attention to Morrowind it was turned into a full-fledged Ordinator military base. Then the Armistice was signed, the Indoril who had supported the base were gone from the region and the area was demilitarized. Iliath lay abandoned until the IAS pitched up camp there to try and puzzle its history together again.
This is set around -11, -19.
Design Note: It's a location carried over from ESO, where it used the generic Indoril/Mournhold tileset. It needs to be reimplemented with the Velothi tileset. An early concept as well as screenshots of Iliath-in-ESO are available here: