The Sin War
Nephalem and The Purge
Inarius, Lilith and their followers lived in relative harmony in Sanctuary. In fact with no war to be had, they amused themselves in other way. Specifically copulating and reproducing. The offspring that came of this inter-breeding was known as the Nephalem. The first being the son of Inarius and Lilith, Linarian.
Linarian would later come to be known as Rathma, the first necromancer. Linarian and the other first nephalem are known as The Ancients. There were supposedly tens of thousands of Ancients at some point in the history of Sanctuary, who all spread across this new world in their efforts to discover and understand it.
Just as Sanctuary had been the only successfully stable world made using the World Stone using the efforts of both Angels and Demons, it seems the combination of these two species also spawned a much more powerful and stronger offspring in the Nephalem.
What was at first viewed a blessing by our unlikely couples, quickly became a concern. The Nephalem were far more powerful than anything that had come before, and some were concerned of what this mean for angels and demons. Could the Nephalem become a threat? Could they make either Heaven or Hell aware of the existence of Sanctuary and put this relative paradise in danger?
The concerns over the perceived threat of the Nephalems power caused much fighting between Lilith and Inarius and their band of runaways. Inarius took some time away to contemplate the potential destruction of these children.
Lilith, seeing the potential in the Nephalem's power wanted to use it to her advantage to end the Eternal Conflict once and for all, by using them to destroy Heaven and Hell leaving her as the ruler over all creation. Sensing the impending slaughter of these offspring she struck first by weilding a total bloodbath over Sanctuary. Lilith made quick work of murdering all of the other Angels and Demons whilst Inarius was still contemplating his final move.
Returning to find that his love had seemingly gone insane and wiped out all of their followers, Inarius still did not have the heart to kill her. Using the World Stone Inarious banished Lilith to the Void, an area that sits outside of the known Universe never to return. Let's see how that turns out.
Inarius ultimately decides that all of this bloodshed was not the fault of the Nephalem, and they should be allowed to live, however only under his control. Wielding the powers of the World Stone once again, he supresses the powers of the Nephalem. As generations of Nephalem are born and die, eventually all their power is lost and we are left with much less impressive humans.
The Cathedral of Light and The Triune
Following an unspecified amount of time, and humans having no memory of their ancestors' history or power, humans still found a way to get themselves into trouble.
The World Stone was missing from Pandemonium, and the disappearance of some key characters had not gone unnoticed by the High Heavens or the Burning Hells, most pointedly the Prime Evils. With Sanctuary being concealed and them having no knowledge of its existence they didn't have many avenues of investigation.
Some humans were still capable of practicing magic, not at their previous levels of proficiency but enough for a clan of mages in Kehjistan to accidentally summon a demon. The Vizjerei Clan responsible for this monumental mess-up are mentioned throughout the games, and were known for their skills in summoning spirits. Except they weren't spirits, they were demons.
The Prime Evils sensing not only the potential of Sanctuary but the dormant powers of the Nephalem in the human descendants of the Ancients, hatched a plan to corrupt humanity to their own ends. Rather than beam down to Sanctuary and start wreaking havoc, and alerting the High Heavens to its existence, The Prime Evils created a religion to corrupt unsuspecting humans — The Triune. The cult of the Three.
The Triune consisted of Three distinct sub-sects devoted to three guiding spirits, that were not at all suspicious:
Order of Dialon dedicated to the Spirit of Determination (not Diablo)
Order of Bala serving the Spirit of Creation (most definitely not Baal)
Order of Mefis serving the Spirit of Love (not Meph.... ok you get it)
As humans joined the religion of The Triune with good intentions, they would eventually be corrupted and brainwashed with the true teachings of the order. The leader of The Triune 'The Primus' was actually the son of Mephisto and Lilith's brother, Lucion. He obviously had a much better relationship with his father and wanted to take on the family business of hatred, destruction and general terror.
Inarius was not blind to the corruption of the Triune, and that there were others now at least in Hell that knew of Sanctuary. Still unwilling to let the High Heavens in on the secret of his paradise and the now powerless humans, he started an opposing religion — The Cathedral of Light. Taking on a mortal disguise Inarius became The Prophet, the leader of this competing religion. For centuries the two religions co-existed, competing for ultimate control over the hearts and minds of mortals, though with no direct conflict or confrontation that would alert the High Heavens.
The Sin War
The Sin War begins with a seemingly innocent story of a farmer, Uldyssian ul-Diomed who is already disillusioned with the current control of the two established religions in Sanctuary. He believes that the Cathedral of Light and the Triune are self-serving and exploit the lower classes for their own means, and his unwillingness to pick a side gets him in hot water and framed for a murder he hasn't committed.
In the course of this tale, he meets and becomes infatuated with a noblewoman who shares his beliefs and wishes to help him raise a rebellion against these two factions, Lylia. Uldyssian begins to manifest powers, which he uses to free himself from captivity and escape with Lylia and a band of rebels. These powers not only grow but he finds himself able to awaken them in others and becomes a spiritual leader of an uprising against The Cathedral of Light and the Triune.
Lylia is revealed to be none other than Lilith, who has managed to escape the Void and return to Sanctuary. She has been manipulating the World Stone under the nose of Inarius to awaken the nephalem powers within humanity, starting with Uldyssian who is later revealed to be a direct descendant of Rathma. Lilith ultimately wants Uldyssian and his followers to join her in an uprising against both Heaven and Hell. Unfortunately, the awakening of this power backfires against Lilith, whose offer is rejected by Uldyssian as he now finds himself strong enough to fight her influence. In fact, Uldyssian can channel the power of the Ancients without her aid and uses this to again banish Lilith to the Void.
These actions don't go unnoticed by the High Heavens who are now aware of Sanctuary, humanity, and the presence of demons in this domain, and the full brunt of the Eternal Conflict is inflicted upon the world. Stopped only by the eventual sacrifice of Uldyssian who gives his life to banish both Angels and Demons from Sanctuary and seal off humanity once again. In this, he also wipes the memories of the humans who were impacted so they can no longer remember the power they once yielded or the existence of Uldyssian himself.
Following this epic battle, both the Angiris Council and the Prime Evils are fully aware of the power that humans are capable of wielding and find themselves in the same quandry that Inarius and Lilith found themselves in at the beginning. The Angiris Council were split on the fate of humanity, with Malthael himself choosing to abstain from the vote. Tyrael himself undecided on humanity's fate, after much thought felt that Uldyssian's sacrifice was proof of the good in humanity, and therefore cast the final vote to leave them to flourish.
The two sides agreed to let the World Stone stay in Sanctuary, call a truce, and agree to sit back and wait. Letting Sanctuary survive as its own domain, and see how humanity advances.
As part of this peace deal, Mephisto demands Inarius as a prisoner. The Angiris Council begrudgingly agree to hand him over, they aren't exactly fond of him themselves after the prior events, and Inarius is then held captive by Mephisto for what we believe is 3000 years of torture.
The Dark Exile
So the truce between Heaven and Hell went swimmingly, and the Eternal Conflict had finally come to a conclusion, right? Well demons aren't exactly known for their honour when it comes to deals, so it's not exactly a surprise that the Prime Evils went straight back to plotting how to return to Sanctuary and wreak havoc, or at least get humanity to side with them against Heaven and ultimately win the Eternal Conflict (yes this again).
The Lesser Evils, weren't so enamored with this plotting. The despised the obsession over humans and didn't understand the fascination as they believed Demons to be superior in every way, having not experienced the might of Uldyssian themselves. The Lesser Evils wanted to continue to fight the High Heavens and viewed all this Sanctuary lark as an irritating side quest in the ultimate goal.
The four Lesser Evils banded together, to wage a rebellion against the Primes, turning their followers against them and eventually winning and banishing them to Sanctuary. Azmodan, the tactician, believed that the Prime Evil's presence in Sanctuary would turn Heaven's interest back toward humans, and they would leave the Gate of Heaven unguarded.
Whilst the Lesser Evils celebrated their victory, so to did the Prime Evils as it had been their plan all along. By being overthrown and banished to Sanctuary they themselves hadn't violated the terms of the truce.
The Three Prime Evils ravaged Sanctuary, taking on human hosts to corrupt humanity, feeding upon the worst parts of men across the Eastern regions, causing pain and suffering wherever they interfered.
Eventually, their presence was noticed by Tyrael, and knowing how shaky a foundation the truce was made on, he decided to take matters into his own hands without alerting the Angiris Council. Gathering members from the Mage Clans, he formed the Horadrim. The Horadrim were an order of crusaders standing for justice and light, bought together to combat the Prime Evils specifically. Members of the Horadric order included Zoltan Kulle, Tal Rasha and Jered Cain. Names you will become familiar with if you do go on to play the games.
Tyrael had prepared special artefacts using shards of the World Stone in which to capture the Prime Evils. These Soul Stones were given to the Horadrim to aid in their quest to capture the three brothers and imprison their essence in each of the stones.
Mephisto was the first to be captured in the lands of Kehjistan, his soulstone was then guarded in Kurast by a religious order, the Zakarum.
Baal was the next to be captured, however, the ensuing battle led to the destruction of his soulstone. Having only a small shard in which to capture him which would only work in the short term, Tal Rasha selflessly volunteered to sacrifice his human body to be a vessel for capture and using the remains of the stone he would battle eternally to keep Baal in captivity within himself. Tal Rasha was then kept in unbreakable chains in a tomb in the Canyon of the Magi.
Diablo was the last to be found, 15 years after their quest first began. In Khanduras a final showdown took place between Diablo and the Horadrim that nearly wiped out the order. Diablo was imprisoned in a soulstone and this was hidden in a cave, found in a labyrinth near the River Talsande. The Horadric order built a monastery to guard the labyrinth lest Diablo ever be discovered and released.
Villages and other settlements sprouted up around the monastery over the years, and eventually the town of Tristram. The monastery itself would come to be known as Tristram Cathedral, and Diablo would remain trapped there for two centuries as humans forgot about the existence of the Prime Evils, and even the Horadrim themselves.