In Greek mythology, Hades was the god of the underworld, a brother of Zeus. Hades was also named Pluto. He abducted Persephone which caused winter. His realm was also named Hades (and was also called Tartarus). Hades was the dark land where the dead lived.
Odysseus entered that realm and fed the ghosts with blood to get directions back home (Homer’s Odyssey 4.834). Originally the Greeks thought of hades as simply the grave. It represented a shadowy, ghostlike existence for all who died, good and evil alike. Gradually Greeks and Romans came to see hades as a place of reward and punishment. Hades became an organized and guarded realm where the good were rewarded in the Elysian Fields. The evil were likewise punished (so described by the Roman poet Virgil, 70–19 BC).
"Hades" became important to the Jews as the word used to translate the Hebrew name “Sheol” into Greek. This was a very suitable translation for the Hebrew word used by translators of the Greek New Testament, the Septuagint. Both words can signify the physical grave or death (Genesis 37:35; Proverbs 5:5; 7:27). Both words referred to a dark underworld where existence was at best shadowy (Job 10:21–22; 38:17; Isaiah 14:9).
Sheol is described as under the ocean and as having bars and gates (Job 26:5–6; 17:16; Jonah 2:2–3). All people go there whether they are good or evil (Psalm 89:48). In the earlier literature there is no hope of release from Sheol/hades.
C. S. Lewis describes this concept well in The Silver Chair: "Many sink down, and few return to the sunlit lands." Of course, all these descriptions are in poetic literature. It is hard to say how literally the Hebrews or the Greeks took their descriptions of hades/Sheol. They may have simply used the older picture-language of Greek poetry to describe a concept for which prose words were inadequate.
Jews and Greeks both came in contact with Persian literary influences. After the Jewish people returned from exile, writers were composing their books (For example, Malachi, Daniel, and some psalms) in context with Persian influence.
The Greeks came into contact with Persian literature somewhat later (they fought the Persians from 520 to 479 BC and conquered them from 334 to 330 BC).
Whether due to Persian influence or not, during this period, the idea of reward and punishment after death developed. Sheol/Hades changed from a shadow land to a differentiated place of reward and punishment for both Greeks (and Romans) and Jews.
Josephus records that the Pharisees believed in reward and punishment at death (Antiquities 18.1.3). A similar idea appears in 1 Enoch 22. In these cases in Jewish literature, hades indicates one place of the dead, which has two or more sections.
In other Jewish literature, hades is the place of torment for the wicked. The righteous enter paradise (Psalms of Solomon 14; Wisdom of Solomon 2:1; 3:1). Thus, by the beginning of the New Testament period, Hades has three meanings:
death
the place of all the dead, and
the place of the wicked dead only.
Context determines which meaning an author intends in a given passage.
All these meanings appear in the New Testament. In Matthew 11:23 and Luke 10:15, Jesus speaks of Capernaum’s descending to hades (New Living Translation with Margin Notes). Most likely he means that the city will "die" or be destroyed. "Hades" means "death" in this context, as "heaven" means "exaltation."
Revelation 6:8 also exemplifies this: Death comes on a horse, and hades (a symbol of death) comes close behind. The personification of hades probably comes from the Old Testament, where hades/Sheol is viewed as a monster that devours people (Proverbs 1:12; 27:20; 30:16; Isaiah 5:14; 28:15, 18; Habakkuk 2:5).
Matthew 16:18 is a more difficult use of hades. The church will be built upon a rock and the gates of hades will not prevail against it. Here the place of the dead (complete with gates and bars) is a symbol for death. Christians may in fact be killed, but death (the gates of hades) will no more hold them than it held Christ. He who burst out of hades will bring his people out as well.
This is also the meaning of Acts 2:27 (quoting Psalm 16:10). Christ did not stay dead and his life did not remain in hades. Unlike David, he rose from the dead. In either of these cases hades could be simply a symbol for death. Or it could mean that Christ and the Christian actually went to a place of the dead called hades. Probably the former is intended. Whatever the case, since Christ did rise, he has conquered death and hades. He appears in Revelation 1:18 as the one holding the keys (the control) to both.
Two New Testament passages refer to hades as the place where the dead exist: Revelation 20:13–14 and Luke 16:23. In Revelation 20 hades is emptied (either of all the dead or the wicked dead, depending on one’s eschatology), making the resurrection complete. When the wicked are judged and cast into the lake of fire (Gehenna), hades is also thrown in. Luke 16:23, however, clearly refers to hades as the place of the wicked dead. There the rich man is tormented in a flame, while the poor man, Lazarus, goes to paradise (Abraham’s bosom).
Hades, then, means three things in the New Testament, as it did in Jewish literature:
Death and its power is the most frequent meaning, especially in metaphorical uses.
It also means the place of the dead in general, when a writer wants to lump all the dead together.
It means, finally, the place where the wicked dead are tormented before the final judgment. This is its narrowest meaning, occurring only once in the New Testament (Luke 16:23). The Bible does not dwell on this torment. Dante’s picture in The Inferno draws on later speculation and Greco-Roman conceptions of hades more than on the Bible.