Hell in Diablo II can mean one of the following:
Game Difficulty: Hell
When starting your first character in Diablo II, you will automatically have a character starting on 'Normal' difficulty setting. This difficulty setting dictates monster hit points, damage, immunities etc. It's mathematically impossible for a starting character to survive in any other difficulty setting than Normal (if it was possible to do that). When a character kills Diablo, he can then continue to the Nightmare difficulty, playing the game again. When Diablo is vanquished on Nightmare setting, a last testament on Hell difficulty can start.
Things like the Pandemonium Event or killing Uber Diablo can only be done in Hell difficulty.
The Burning Hells is the birthplace of demons like Diablo, Mephisto or Baal. They are in conflict with the High Heavens, where Angels like Tyrael rule.
This is just part of the material available on this topic. The Diablo 2 Wiki 'Hell' article is also available in the main wiki where a lot of new information has also been made available after the announcement of Diablo III. You can find it here: