Diablo is set in the world of Sanctuary. In the universe there is an eternal conflict between the High Heavens and the Burning Hells. The High Heavens are led by the Angiris Council and the Burning Hells are led by the Prime Evils. At an unspecified point in time the Arch-Angel Inarius grew weary of the never-ending struggle, and, gathering a handful of like-minded angelic companions, left the battlefields. While searching for a place untouched by battle, Inarius and his followers encountered a group of Demons from the Burning Hells who had also grown weary of conflict. Led by Lilith, the daughter of Mephisto (eldest of the Prime Evils), these demons joined with the angels and, over time, intermingling caused attraction. For the first time, there were unions of angels and demons. Even Lilith and Inarius fell in love. Eventually, by gradually manipulating the very substance of the universe, Inarius created the world of Sanctuary. He also created a massive crystal-like object known as the "Worldstone," which he bound to Sanctuary and to himself. He used it to hide Sanctuary from the ever-roving eyes of the High Heavens and Burning Hells.
Source: Wikipedia "Diablo_(series)," available under the CC-BY-SA License.