Great Lake Swimmers, who are "notorious"[2] for their unconventional recording locations, recorded Lost Channels in a variety of locations in and around the Thousand Islands, including Singer Castle near Hammond, New York. The band was originally invited to the Thousand Islands area by Ian Coristine, a historian and aerial photographer from the area, after he heard the band on Stuart McLean's radio program The Vinyl Cafe.[3][4] When Tony Dekker and the band were prepared to record a new album, they accepted Coristine's invitation and asked him if there were any "interesting spaces in the area"; one of these suggested locations was Singer Castle.[3] Despite a tight schedule and what Dekker called a "very limited amount of time and limited resources",[3] part of the band managed to travel to the castle by boat and record the vocals and acoustic instruments for several tracks.[3] Though most of the songs were already written by then, Dekker tried to "incorporate the mood and the imagery of the surroundings"[4] and "capture a little bit of the energy of the place"[5] into his songs; the track "Singer Castle Bells" actually consists entirely of the castle's hourly chimes. This incorporation was noted by Sarah Liss of the CBC, who wrote that "[t]he delicately layered banjo plucking and resonant Hammond organs that surge on the jubilant chorus of 'Pulling on a Line' draw you right into the room where the song was recorded."[4]
The album itself is named for the Lost Channel, a spot in the Thousand Islands photographed by Coristine where a British naval boat with a crew of fourteen mysteriously vanished on August 14, 1760, because the band had "spent so much time [in the area], and made such an effort to record there".[3] In addition to Singer Castle, the band also recorded in several locations in Ontario: the Brockville Arts Centre in Brockville, St. Brendan's Church in Rockport, the House of Miracles in London, Halla in Toronto, and the Lincoln County Social Club in Toronto.[6]
Dekker has explained in concert that "Concrete Heart" was written for a project in which various Canadian musicians were asked to write songs about Toronto architecture, and "The Chorus in the Underground" was written about a concert by Canadian indie rock band A Northern Chorus.
A reviewer at the CBC praised the album as being the group's best, saying:
There's a magical, warm quality to the songs on Lost Channels, a richness and collective spirit that hasn't always been present in Great Lake Swimmers' songs. The Swimmers' first two albums, while still lovely, often felt a bit too breakable, that the airy arrangements supporting Dekker's plaintive confessionals might dissolve if you listened too hard. The seeds for a rootsier sound were planted on Ongiara and now they've come into full bloom.[4]