I definitely recommend book of cain, it touches on pretty much everything, the creation of the world, creation of sanctuary, all 3 prime & 4 lesser evils, all of the top angels of the high heavens, a resume of the sin war, mage clan war, worldstone, diablo 1, diablo 2 & what to expect in diablo 3 including a resume of all zones in diablo 3 + it includes a map of the world that is in the back of the book (open the envelope..), it's about 145 pages & take on average 3-4 hours to read I'd say, lots of picture, awesome.
The book of cain is an awesome place to start if you really are into Diablo lore. The lore is quite dark, and someone already did a good job of linking all the cinematics. Some of it has been retconned like the Dark Wanderer but it's still all very relevant.
Thanks! I'm currently reading through The Book of Cain, should take me about another hour and then I'll watch the videos to add some more imagery to the story.
---------- Post added 2012-03-20 at 09:37 PM ----------
I've just finished reading through 'The Book of Cain' and I've found my answer. To be honest anyone with a little bit of knowledge or anyone who had read the Book of Cain could've easily told me the answer. What it sums(dumbs) down to is this:
Theres the High Heavens and the Burning Hells, there's a few Angels but Tyreal is by far the most mentioned one. The bad guys in the Diablo story are the following 7, the 7 Evils: there's the three Prime Evils; Diablo, Mephisto and Baal. And then there's 4 Lesser Evils; Duriel, Andariel, Azmodan and Belial. Note: lesser certainly does not mean any weaker than the Prime Evils.
The Sanctuary, the world where you play and the humans live in, was created by Inarius (Angel) and Lilith (Demon, daughter of Mephisto) as a world where humans (a.k.a. the Nephalem) can live more or less away from the High Heavens and Burning Hells (I believe by creating the worldstone, which forms a protective barrier for the Sanctuary). Where did the humans come from you ask? Well Inarius (remember he's an angel) and Lilith (demon...) came together and had a few nights of intense smoking hot perverted love making getting Lilith knocked up. She ends up giving birth to the Nephalem/humans.
The situation at the start of D3 is this: The first two Prime Evils (Diablo and Mephisto) have been captured in Soulstones and shattered upon the Hellforge deep in the Burning Hells, casting them off to the ''Abyss'' (a place said to be beyond the Burning Hells, a place where even they feel fear). The third Prime Evil, Baal, Died when Tyreal intervened while he tried to take over the Worldstone. Tyreal threw his sword into the Worldstone, shattering it and killing Baal and himself (or at least their physical form). What becomes of Tyreal after is unknown, but Baal is also cast off to the Abyss.
Now for the four Lesser Evils. In the Book of cain, to me kinda as a side story, Duriel and Andariel die. This leaves the other two lesser evils (Azmodan, big baddy from the black soulstone trailer and Belial) alive and kicking, ready to mess with the Sanctuary and I think these two will probably make an appearance in D3. What the shattering of the Worldstone does to the world is unknown and I hope this will be shown in D3. The Back Soulstone is briefly mentioned in this story and I haven't yet found how it ended up on Leah's desk.
I believe this pretty much summs it up. Hope it helps anyone that was still unsure about buying the game looking for a quick introduction into the current situation.