The Mormon Plan of Salvation / Eternal Progression
Click on a region of the graphic below
to learn more about the different components
of the Mormon view of the afterlife.

Intelligence
Before birth in the spirit world or on Earth, Mormonism teaches that we all (including God, at some point in the distant past) existed as etherial intelligences, that are eternal; that is, there was never a time when we did not exist. These intelligences are the building blocks for our birth as spirit children. (return)
The Spirit World
At some point in the distant past, according to Mormonism, we were born to Heavenly Father (and the implication of this always includes a Heavenly Mother, one of God's polygamist wives). There we happily existed in their presence. However, in order to begin the journey to eternal progression and eventually to Godhood, we had to receive an earthly body. This was, after all, exactly what God before us had done; he, too, had been born a man on some other world, and eventually progressed to the position where He is now. God continues to grow and progress, and he wants His children to become gods like him. (return)
The War in Heaven
When the creation of the earth was being planned, Jesus and Lucifer, two of Heavenly Father's spirit children, both presented a "plan of salvation" for mankind. The Heavenly Council accepted Jesus' plan, which included "Free Agency" and the plan that is presented on the above diagram. Lucifer, in a fit of jealous rage, staged a rebellion and got 1/3 of the spirit children in Heaven to rebel with him. There was a war, and eventually Lucifer (Satan) and those who rebelled with him were cast out of heaven. (return)
Earth
Also called the "Second Estate", those spirit children who qualify for eternal progression are given the chance to come to Earth. This privilege is based on merit, and reinforces the Mormon belief that mankind is basically good, because any of us born on Earth had to be good and worthy to even be born here and be given the chance to progress eternally.
But even here, not all things are equal. During the war in Heaven (see above section), there were those spirit children who fought valiantly, others who fought less valiantly, and still others who remained neutral. Therefore, a person's station on earth was determined in large part by what degree of "worthiness" a spirit child had in the pre-existence.
Those who fought most valiantly were given the privilege of being born white, and the most valiant of them are given the privilege of being born into white, righteous Mormon families. Those who remained neutral are born with dark skin, so the implication of this teaching is that the varying shades of color that shows up in the human race spectrum is closely tied one's performance during the war in Heaven. The whiter you are, the more valiantly you fought during this war; and likewise, the darker you are, the less valiantly you fought.
As you can imagine, this teaching does not come forth in public very often today, for obvious reasons. Yet it was because of this doctrine that those of African decent were barred from receiving the Mormon priesthood. This ban was lifted in 1978, and since that time, a fairly active campaign to reform Mormonism's racist image has taken place--both within and outside of Mormonism. In fact, many younger Mormons and converts to Mormonism within the past couple of decades may never even have heard of this teaching. Nevertheless, the teaching itself has never been repudiated.
So regardless of one's station on earth, earthly existence is a period of testing for faithfulness and obedience. Those who embrace the Mormon gospel, who live the principles of Mormonism, and in particular, those who are married in the temple (originally it was taught that plural marriage, or polygamy, was a requirement), may qualify for eternal progression to Godhood. Those who fail in these regards will be assigned a correpondingly lower level of glory or heaven. (return)
Paradise & Hell
Following death on earth, each person ends up in one of two temporary places--Paradise, a place of blessing, or Hell, or Spirit Prison, a place of torment and testing. Generally speaking, Paradise is for faithful Mormons, while Hell is for everyone else. (By this definition, "Hell" has a lot more in common with the Roman Catholic concept of "purgatory".) According to some teachings, the length of time in Hell is determined by how much sin there was in your earthly life, and how much needs to be purged and cleansed.
During this period of time prior to the resurrection of the dead, people in Hell are given an opportunity to hear the Mormon gospel, because faithful Mormons in Paradise will actually be given the chance to do "missionary work" of sorts in Hell. For those people in Hell who accept the Mormon gospel, they may qualify for a higher Kingdom when Judgment comes. (return)
Judgment
At the time of the resurrection, when both the good and the wicked are raised from the dead and must give an account for their deeds and performance, both on earth and during their time in Paradise or Hell. At this point, it will be decided who will go to what level of heaven (or, in rare cases, to Outer Darkness.) (return)
Outer Darkness
Outer Darkness probably most closely resembles the Christian idea of Hell, in that it is eternal separation from all that is good and glorious, a place of torment and despair. It is the abode of Satan and the spirits that followed him in rebellion. It is also the destination of those Mormons who apostatize, or for those who have committed unpardonable sins. While the issues that decide who ends up in Outer Darkness are not entirely agreed upon in Mormonism, the general thinking is that very, very few people will end up here. (return)
The Telestial Kingdom
The Telestial Kingdom, or the lowest of the three levels of Heaven, is reserved for the wicked and reprobate of the world. "Dishonest, liars, sorcerers, adulterers, and whoremongers" according to one popular LDS chart depicting the afterlife sheme. The teaching on what exactly it's like isn't entirely clear, but it's presumed to be a pleasant enough place, but pales to the glory of the Kingdoms above it. (return)
The Terrestrial Kingdom
The Terrestrial Kingdom is reserved for those people who are generally good and honorable, but who have rejected the gospel of Mormonism; it also holds those Mormons who were not faithful or valiant in their earthly life and/or did not prove themselves worthy enough in the afterlife. It has been said that it is heaven for the underachieving decent people. It is a paradisical place, but pales in comparison to the glory of the Celestial Kingdom. (return)
The Celestial Kingdom
The Celestial Kingdom is reserved for faithful Mormons, and is by far the most exclusive "club" in the Heavenly spectrum. The Celestial Kingdom is itself divided into three different levels, the top level being reserved for those valiant and faithful Mormons who are married according to Mormon precepts in a Mormon Temple, and thus qualify for progression to Godhood. (Originally it was taught that this so-called "Celestial Marriage" meant plural marriage, that is, polygamy. This teaching is still held by Mormon Fundamentalists who practice polygamy, but it is eschewed by the mainstream LDS Church, who currently define "Celestial Marriage" as simply "Temple Marriage.")
The lower levels of the Celestial Kingdom are reserved for those faithful Mormons who did not marry in the temple, or (in the case of Mormon fundamentalists) who do not have multiple wives.
Those who make it to godhood are able to create their own world, just as God created this world, and begin the whole process of eternal progression all over again for their own spirit children. (return)