This village was built when Isamu Kinzoku lead the Gravity and Air Villages to the Earth Nation for the metal minerals. They used their jutsus to create a village under ground and a small town up above. The main village, which was below, consisted of everything metal except for soft dirt was put on it to make the ground soft. The above was just metal and the normal ground. Soon, the Earth Village fell during the Great War and the Metal Village took over, but since the Gravity and Air Villages wanted to make their own village so about half of the ninjas separated and mostly metal ninjas remained inside the Metal Village. The Metal Nation lived on though, and Isamu was executed for involvement in the Akatsuki.
This was in the Metal Nation because Isamu Kinzoku, the former leader of the Metal Village, was in the Akatsuki and made a completely hidden site that was the best site for the Akatsuki to stay. Eventually someone from the village saw him go out and meet up with the Akatsuki, although he didn't see the base, and the Metal Village executed Isamu when he came back. It still is there now and no one but the Akatsuki have seen it yet.