Charlie is the son of Desmond and Penny. He was born on the sailboat "Elizabeth" during the 1970's. The scene with young Charlie on the boat with Penny and Desmond is during the 1970's. Desmond goes to look for Farady's mother at Oxford during the 1970's. You can tell by Desmond's hair and clothes. Later, Ben kills Penny. Desmond will return to the island to try and change the timeline to save Penny and/or revenge Ben. Charlie will be "raised by another". Probably something to do with "Simon's Butcher Shop". Liam is not his blood brother.
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