Unique to the Mormon faith is a belief in three degrees of glory, or three distinct heavens.
Celestial: Home to the gods and future hope of faithful Latter-day Saints. It also has three levels or degrees.
Terrestrial: Dwelling of righteous non-Mormons, unfaithful Mormons.
Telestial: Eternal destination of the wicked.
Referred to as "Spirit Prison" among LDS members. While it is seen as an eternal place, LDS do not believe anyone will dwell in hell for more than a season of time leading up to the Judgment Day. Spirit Prison is a place for instruction and opportunity for conversion to the Mormon faith.
Mormons believe they will go to a place called "Paradise" after death, and will stay there until the Judgment Day when they will be sent to one of three degrees of glory. Faithful Mormons believe they will dwell in the Celestial Kingdom. Mormons married in a temple believe they can eventually become gods or goddesses within the Celestial realm.
The devil & his demons will be cast into "Outer Darkness" along with the "sons of perdition" --believed to be certain individuals who have apostazied from the LDS faith.
"All sins shall be forgiven, except the sin against the Holy Ghost; for Jesus will save all except the sons of perdition. What must a man do to commit the unpardonable sin? He must receive the Holy Ghost, have the heavens opened unto him, and know God, and then sin against him. After a man has sinned against the Holy Ghost, there is no repentance for him. He has got to say that the sun does not shine while he sees it; he has got to deny Jesus Christ when the heavens have been opened unto him, and to deny the plan of salvation with his eyes open to the truth of it; and from that time he begins to be an enemy. This is the case with many apostates of the Church of Jesus Christ of Latter-day Saints" (Joseph Smith, King Follett Discourse April 7, 1844, History of the Church vol. 6 pp. 302-317).
For more on the Christian view of the "third heaven" (Three Levels of Heaven), please see Proof-Texts section under Scripture.
Do Mormons really believe they can become gods?
"In the resurrection, some are raised to be angels, others are raised to become gods" (Teachings of the Prophet Joseph Smith, p. 312; Mormon Doctrine, Bruce R. McConkie, p. 640).
"No man can conceive of the glory that may be attained through the resurrection. God himself, the Father of us all, is a glorified, exalted, immortal, resurrected Man!" (Teachings of the Prophet Joseph Smith, pp. 345-346; D. & C. 130:22; Mormon Doctrine, p. 643).
"...Nothing is more basic in the restored gospel than these truths that, because of recent events of space travel, are so timely. The great hope of the gospel for us is that we may come to a oneness with our Lord and our Father and partake of this same work and glory and godhood. Being joint-heirs of all that the Father has, we may then look forward to using those powers to organize still other worlds from the unorganized matter that exists throughout boundless space. Creating other worlds, peopling them with our own eternal posterity, providing a savior for them, and making known to them the saving principles of the eternal gospel, that they may have the same experiences we are now having and be exalted with us in their turn—this is eternal life" (New Era, April 1971).
Latter-day Saints believe that those who experience "exaltation" (godhood) by following the Mormon plan of salvation, "...will have everything that our Heavenly Father and Jesus Christ have--all power, glory, dominion, and knowledge" (Doctrine and Covenants 132:19-20).