It
was their respawn point
before Sargeras smashed it, he intentionally made it that so that he could contain them there.
We know therefore that Mardum can't be such a "fel saturated" area that kills demons, because otherwise Sargeras would easily have just killed them instead of imprisoning them. He created it when he wanted to destroy the demons, after all!
Illidan wasn't alive back then :P
Originally Posted by Blizzard Entertainment
When Sargeras abandoned the Pantheon and searched for an army to help him scour the universe of all life and prevent the efforts of the void lords and their Old God creations, he returned to Mardum. Over the eons, the prison had become bloated, the presence of countless demons warping the world into a nightmarish realm constantly bombarded by torrents of fel energy and bathing the captive demons in a sea of volatile magic.
What I meant is that this sounds exactly like what you would assume a "fel-saturated" world would be, except it clearly isn't because nothing that died on it died permanently, so it must mean something more than just "a place where a lot of demons were".
Something separates Mardum (a place a lot of demons were kept) from Argus and Nathreza (a place a lot of demons intentionally lived) which means that they can be killed permanently in one but not the other.
As an aside, demons just reappear "within the twisting nether" and not on their home planet. What exactly this means isn't entirely clear, but I imagine that after "respawning" they have to be summoned back to their homeworld rather than naturally forming there.