The story line of Diablo III is mostly unknown to us at this point. We know it takes place twenty years after a few powerful heroes saved Sanctuary from the demonic onslaught in Diablo II.
Please note that information listed here are mixed canon details and speculation.
Contents
Known Story
The demonic invasion 20 years ago affected very few people, most of which have been wiped from the face of Sanctuary. Many of the few survivors went mad from their experiences. Some people know that some sort of conflict took place, but for the most part the war against Diablo is a myth.
What happened to Tyrael after he destroyed the Worldstone is unknown to everyone. Scholars like Deckard Cain anticipated a huge invasion of demonic forces as the protection from the High Heavens and the Burning Hells, but no invasion have begun. Cain has spent the last years trying to figure out what happened, and trying to prepare us for the inevitable onslaught.
We know from the Diablo III cinematic that a great comet of some importance is falling down on to the Tristram Cathedral, and that some unlucky soul (if it's Leah or Cain isn't sure) is hit by it. Hell's armies are amassing, and it isn't safe any more.
The story will focus more on the "two major demons[1][2] and the impending invasion of Sanctuary" rather than the homelands of individual character classes. We know Belial is in the game, most likely one of these two major demons.
All characters are "new" characters bar the Barbarian, who is the same character as in Diablo II, only aged 20 years. At least one more class from Diablo II will also show up in the game, but it's not mentioned as a playable class.
"Several of the NPCs, from both the original Diablo and Diablo 2" will also return according to Jay Wilson.[3]
Cinematic and Story Opening
From what the Diablo 3 team has said about the state of the world at the start of the game, and from additional information included in the D3 cinematic teaser, this is the apparent state of the world. This summary incorporates some speculation.
After the conclusion of events in D2X, including the slaying of Baal, his vast armies remained a threat to the Barbarian lands even after Baal's death. Their threat was ended by the explosion of the Worldstone, which destroyed Mount Arreat, blasting Arreat Crater, an explosion that devastated the remainder of Baal's forces and ended their siege of a major Barbarian city.
The events of Diablo 3 pick up twenty years later, shortly after a fiery meteorite falls from the sky and crashes into the Tristram Cathedral, blasting a deep hole down into the catacombs below. The first setting of the game will be in Tristram, as the hero must descending into the depths below the Cathedral, defeating the reanimated Skeleton King along the way. Deckard Cain will be encountered in Tristram, and he will rejoin the quest as he did in Diablo 2.
Act Two takes place in the desert again, this time on the western side of the Twin Seas, across the ocean from Lut Gholein. The events of that act are set around Caldeum, a mighty trading city now retreating into itself and allowing chaos and demons to spread across the desert.
Nothing is yet known about events in Act Three and beyond.
Timeline
Locations
We only know of a few locations that we will visit in the game. This list is for the locations that have lore value rather than the names of the levels in the game:
Characters
All NPCs, many monsters, and the player characters in the game all have in common they are characters, meaning they play a part of the story, and are joined with characters from lore such as the manuals, the novels or comics. Anything that is canon and some that is not can be found in the character category:
Monsters
Sanctuary Literature
Besides the novels and such books, there are also books created in Sanctuary. Everything from journals of important characters, to full literary works and prophecies. It's all part of the world, and is added to the Diablo database:
Artefacts
Certain pieces of equipment, jewellery, weapons or other items contain so much power they are called artefacts. The world of Diablo is full of them, and if you're lucky you can find some powerful artefacts in your travels around Sanctuary.