Prelude to destruction
In the wake of all of this, a civil war erupted in Hell between the Prime Evils and the four Lesser Evils. These four (Duriel, Andariel, Azmodan and Belial) were getting annoyed that their three “bigger cousins” had become obsessed with corrupting humans rather than continuing to wage direct war against Heaven. They rose up and exiled the Prime Evils to Sanctuary, where they could spend as much quality time with their mortal pals as they wanted.
Rise of the Horadrim
Through persistence, the Horadrim eventually succeeded... with one minor hitch. The soulstone that was supposed to hold Baal shattered during a battle, and the shards could not be reassembled. Tal Rasha, leader of the Horadrim, offered his own body as Baal's prison, ordering the others to lock him away deep below the desert. The other two Prime Evils were properly imprisoned, and their soulstones put under close guard. Spoilers: that didn't last.
- tl;dr: The Lesser Evils rebelled and exiled the Prime Evils to Sanctuary. An archangel, Tyrael, rallied some mortals, founding the Horadrim to find them. All did not go totally according to plan, and Baal entered the body of Horadrim's leader, Tal Rasha.
Things started going downhill hundreds of years later when a man named Leoric showed up in Tristram -- a town that had grown around the now-abandoned Horadric monastery protecting Diablo's soulstone -- and declared himself its king. The imprisoned demon lord was eventually able to corrupt Leoric, who began torturing and killing his people, as mad kings often do. In time, the king's own men were forced to put him down.
As Tal Rasha had done with Baal, Aidan took Diablo's essence into himself. As time passed, he lost his mind to the overwhelming presence of the Lord of Terror, and set off to free the other two Prime Evils.
- tl;dr: Diablo escaped and drove a fellow known as King Leoric mad. His son, Prince Aidan, defeated Diablo... but was possessed by the demon's spirit and became his avatar.
Up Next: The events of Diablo II and beyond