Answer: Satan (Iblis) refused to obey God out of pride and was cursed (removed from God's blessing forever). He blamed God for his fall from grace, and asked that he be given respite till Judgement Day so as to allow him & his progeny to lead mankind astray. God permitted that, knowing quite well that Satan will only be able to lead astray those who choose to be led by him.
1) Iblis is a dJinn. dJinns are a creature made of smokeless fire. They can see us but we cannot see them (from another dimension, I suppose).
2) Iblis was among the angels who were ordered to prostrate to Adam. Iblis refused to prostrate to Adam citing that he is superior to Adam as Adam has been created of clay.
3) Before God created Adam, God informed the angels that he is about to create a vice-regent for Earth. The angels asked why someone who would create mischief and shed blood... (Quran 2:30). God told them 'I know what ye know not'. After God had created Adam and taught him names of all beings (inferred from the arabic pronoun used), He then presented Adam to the angels and asked the angels to name them. The angels did not have the knowledge of those names and thus could not answer. Then Adam was asked and he was able to recite the names of them all.
4) Thereafter, the angels were ordered to prostrate to Adam. They all did except Iblis. He refused, was haughty and became of those who reject faith. God asked Iblis what prevented him from prostrating. Iblis said that Thou didst create me from fire and him from clay (Quran 7:12). God told him that it is not for Iblis to be arrogant , that he is the meanest of creatures, and he was ordered out. Iblis asked for respite till the day they (humans) are raised up. He was granted respite, disgraced and expelled. (Quran 7:13-18).
5) Adam and his wife were told to stay and enjoy all things in garden (heaven) and were only prohibited from one tree. They were warned that if they approach it, they will run into harm and transgression. Satan began to whisper suggestions to them and beguiled them, and through deceit brought their fall. God asked them that weren't they forbidden and were they not warned that Satan was their avowed enemy. They were repentant and humble, so God forgave them.
6) Then were they sent to Earth for a temporal life (Quran 2:36 - 38 and 7:24).
Quran 2:38 'We said: "Get ye down all from here; and if, as is sure, there comes to you Guidance from me, whosoever follows My guidance, on them shall be no fear, nor shall they grieve.'
7) We are warned that Satan and his progeny are our enemies, and that we need to be ever aware of that. We are also told that they have no real power over us: they can only whisper and suggest, and stir up desires; it is up to us whether we choose to follow them or not.
We on Earth, this temporal life and its trials, Satan and his progeny, Prophets and God's guidance, Judgement Day, Heaven and Hell, all this is part of a much larger scheme, of which we have but very little knowledge and insight. Things will be made clear to us when the time is right. So, for the time being, we must use conscience and intelligence as our tools in search of guidance and choose accordingly.