The Fallen Angel is the first quest in Act IV, which is activated by talking to Tyrael. He will tell you the story of his former lieutenant, Izual, who is now trapped within a powerful demonic body. You'll find Izual outside the Pandemonium Fortress in the Plains of Despair as what appears to be a blue Balrogesque demon. In addition to his melee attack, Izual can cast Frost Nova, so having high cold resist and an item with Half Freeze Duration will prove useful. However, the most difficult, or oftentimes irritating, aspect on battling Izual is his massive amount of Health (nearly 12,000 hit points on Normal Difficulty).
Once you've defeated Izual, his spirit will rise from the demonic shell. He will then tell you that instead of being a prisoner, he was actually helping the Prime Evils, letting them know about the Soulstones, how to corrupt them, and helping them plan their own exile into Sanctuary.
Return to Tyrael, and he will reward you with two extra skill points.
NPC Quest Dialog
Tyrael: "There is a dark, tortured soul who was trapped within this forsaken realm long ago. He was called Izual by mortal men, and in ages past he was my most trusted Lieutenant. Yet, against my wishes he led an ill-fated assault upon the fiery Hellforge, itself. Despite his valor and strength, Izual was captured by the Prime Evils and twisted by their perverse power. They forced him to betray his own kind and give up Heaven's most guarded secrets. He became a corrupt shadow of his former self - a fallen angel trusted neither by Heaven nor Hell. For his transgressions, Izual's spirit was bound within the form of a terrible creature which was summoned from the Abyss. His maddened spirit has resided within that tortured husk for many ages now. It seems to me that he has suffered long enough. I implore you, hero, find Izual and release him from his cruel imprisonment. Put an end to his guilt and suffering."
Deckard Cain: "Tyrael has asked you to confront Izual the Fallen? He must have great faith in your abilities! I trust you know what you're doing... Be careful. You're our last hope."
Tyrael: "Though Izual no longer carries the Angelic Runeblade, Azurewrath, he may still possess great strength and power within his new form. Also, he may not be able to tell friend from foe while in his present state. If you find him, he will almost certainly be hostile. Proceed with the utmost caution."
Deckard Cain: "Having trouble finding the Fallen Angel, eh? You'd better hurry. It's beginning to feel like some great evil is permeating the air around here."
Tyrael: "You mustn't delay, mortal hero. Izual must be put to rest, but Diablo still lurks within this realm. Go now... Hurry!"
Deckard Cain: "You're lucky to be alive, my friend! It is imperative that you find and stop Diablo! You should speak of this with Tyrael. He will know what to make of this."
Izual: "Tyrael was a fool to have trusted me! You see, it was I who told Diablo and his Brothers about the Soulstones and how to corrupt them. It was I who helped the Prime Evils mastermind their own exile to your world. The plan we set in motion so long ago cannot be stopped by any mortal agency. Hell, itself, is poised to spill forth into your world like a tidal wave of blood and nightmares. You and all your kind... are doomed."
Tyrael: "Thank you, hero, for putting Izual's tortured spirit to rest. May the Light protect you and the powers of Heaven shine upon your path. But, if what you tell me is true, then I fear that we have been played for fools all along. Izual helped Diablo and his Brothers trick me into using the Soulstones against them... Now the Stones' powers are corrupted. With the combined powers of the Soulstones under their control, the Prime Evils will be able to turn the mortal world into a permanent outpost of Hell!"
Character Quest Dialogue
Amazon: "Goodbye, Izual."
Assasin: "Corruption, take flight."
Barbarian: "Even fallen angels deserve freedom."
Druid: "I feel no pity for him. Oblivion is his reward."
Necromancer: "Izual was a fool, and squandered his infernal power."
Paladin: "How can one so holy fall so far from righteousness?"
Sorceress: "He was corrupted to the core. I pity him."