  We use neutron diffraction to study the temperature evolution of the average
structure and local lattice distortions in insulating and superconducting
potassium iron selenide K$_y$Fe$_{1.6+x}$Se$_2$. In the high temperature
paramagnetic state, both materials have a single phase with crystal structure
similar to that of the BaFe$_2$As$_2$ family of iron pnictides. While the
insulating K$_y$Fe$_{1.6+x}$Se$_2$ forms a $\sqrt{5}\times\sqrt{5}$ iron
vacancy ordered block antiferromagnetic (AF) structure at low-temperature, the
superconducting compounds spontaneously phase separate into an insulating part
with $\sqrt{5}\times\sqrt{5}$ iron vacancy order and a superconducting phase
with chemical composition of K$_z$Fe$_{2}$Se$_2$ and BaFe$_2$As$_2$ structure.
Therefore, superconductivity in alkaline iron selenides arises from alkali
deficient K$_z$Fe$_{2}$Se$_2$ in the matrix of the insulating block AF phase.
