But while Gorefiend's life was over, his afterlife was just beginning. Gul'Dan awoke from his coma to find that Doomhammer had taken over and was planning on killing him. Gul'Dan begged for his life, noting that he was the last user of shadow magic among the orcs -- a powerful tool that could be used against the Alliance. Doomhammer didn't quite trust the shady orc, but agreed to let him life. With Doomhammer's approval, Gul'Dan used the magic of his necrolytes to place the spirits of the Horde's fallen warlocks into the bodies of the dead Knights of Stormwind. Gorefiend was made leader of these new Death Knights.
Some of the Death Knights fought in Azeroth in the Second War against the Alliance, but a few crossed through the Dark Portal to offer their services to Ner'Zhul, now the Elder Shaman. Gorefiend chose to stay on Azeroth, but after the Alliance victoy in the Second War, he fled through the Portal with his remaining Knights. Ner'Zhul offered Gorefiend and the Knights a world to rule if they would help him open portals to other lands. Gorefiend successfully raided Azeroth for several artifacts, enabling Ner'Zhul to open the portals and tear apart Draenor. After that, Gorefiend disappears from the history books. Did he go through the portal and find a world to rule? Do he and the Death Knights haunt Duskwood? No one knew ... until the Horde and Alliance arrived in Outlands a couple months ago.
It turns out that sometime in between the Second War and the Burning Crusade, Teron Gorefiend died again. However, some wandering spirits in Shadowmoon Valley still speak of him. This sufficiently freaks out the Horde and Alliance enough that they send you to speak with an "Ancient Shadowmoon Spirit" hidden on the edge of Shadowmoon Valley. The spirit tells you that Gorefiend killed himself out of guilt, which sounds ... somewhat unlikely. The spirit asks you to bring back three relics of Gorefiend's horrible deeds -- his cloak, his truncheon and his armor.
You can pick up Gorefiend's cloak from the spirits of the Clerics of Karabor, who he apparently murdered in cold blood while a member of the Shadow Council. His jeweled truncheon is held by his fellow Death Knights, who he decapitated just before he "killed himself." One of Deathwing's children has his armor.
When you return all three to the spirit, it turns out that you're an idiot. The spirit is Gorefiend himself, who has been imprisoned at the Altar of Shadows for quite a while. And unfortunately, now that you've brought him all his epix, he can break free. But first, he's got to possess a body to defeat his captor. Hey, yours will do quite nicely!
So in a scene of unmitigated awesomeness, you get possessed by Teron Gorefiend and have to kill a level 72 elite draenei paladin. Luckily, you get to use his abilities (they get put onto your pet bar), so it's not really a problem. You get a haste, a major damage shield, a 4-5k life drain, and DEATH AND DECAY! Yes, the ranged, channeled, AOE shadow attack is yours for the taking. Eventually you kill the paladin, and Gorefiend rides off into the sunset with a promise to see you again in the future. Oh, good, I always did want to see death incarnate again.
Why we have to kill him: When you return to your original questgiver and admit what happened, they get really cheesed off at you despite the fact that THEY'RE THE ONES THAT TOLD YOU TO SEE THE SPIRIT IN THE FIRST PLACE. Some of these NPCs could use a swift hit with a clue-by-four. The questgiver gives you a helmet that lets you see spirits and then tells you to kill Gorefiend if you ever see him, as if that was an easy thing to do. Recently released screenshots from the Black Temple show that Gorefiend is a boss inside. It's unknown why he joined up with Illidan, since his allegiance was always to Gul'Dan and by extension the Burning Legion. He may have just seen the best opportunity to wreak some havoc.
Distinguishing characteristics: Actually, I'm not quite sure what body he's in right now. He looks like an orc when you free his spirit in Shadowmoon, but those Black Temple screenies make him look human. He's also got a big truncheon with a skull on the end.
For more information: Teron Gorefiend on Blizzplanet, Teron Gorefiend on WoWWiki, the Divination questline on Warcry's Jayne Goes to Outland.