Hades/Sheol (or Hell) is the “Land of the dead” which consisted of all those who died before the time of Christ. Those who died in God’s favor were kept in a separated region from those who were damned. This place was called “The Bosom of Abraham” or “Abraham’s Bosom” (or sometimes “Limbo of the Fathers”). These people were kept there until Christ’s death where he went to Abraham’s Bosom and preached to those there. These were the souls that were resurrected with Christ on the third day that people saw wandering around. They were eventually taken up to Heaven with Christ. Now Hell remains the place for the damned. There have been some theories that have appeared in the Church’s history that some people, such as unbaptized babies, are kept in Abraham’s Bosom, but this is merely a theory among many as to the fate of these young souls and seems to have mostly disappeared with people favoring the more mystical answer of submitting them to the mercy of God.
Since Christ’s death and resurrection, after death, a soul is judged for either Heaven or Hell. If a soul that is not perfectly clean is judged for Heaven, they are cleansed of impurities before they are able to enter heaven (Purgatory; specifics are still mostly unknown with many things only being conjecture). Those souls that have chosen against God remain separated from him for eternity in Hell.
At the End Times, when Christ returns, those in Heaven and Hell shall be reunited with their bodies and those left on Earth face their judgement. After which God’s plan, as far as we know, will be accomplished.
This is my understanding.
