The Chosen Ones were human children whom Fairies would protect and avenge if harm came to them. Eventually, the Fairies would claim these children and take them to their "Lost Lands". Once there, the children would become Fairies themselves. The Fairies required these children to continue their race, despite being immortal (or near-immortal).
This connection between human children and Fairies plays homage to the writings of Welsh author Arthur Machen. He believed that faerie folk had to claim one human life every time they emerged, in order to replenish their ranks.
In 1909, after a heavy night of drinking among his unit, one of Jack Harkness's soldiers accidentally killed a Chosen One in Lahore by running them over with a military vehicle. In retaliation, the Fairies killed all his men, sparing only Jack, perhaps aware of his inability to die.
In 2007, Torchwood Three allowed the Fairies to claim Jasmine Pierce as their Chosen One. Jack permitted this on grounds that the Fairies would cause immense destruction beyond Torchwood's control if they were deprived of their newest addition to their ranks. (TV: Small Worlds)