Diablo III will have three difficulty levels, just like Diablo 1 and Diablo 2 did. They'll even still be called normal/nightmare/hell.
Official Comments
Jay Wilson talked about his desire to ramp up the difficulty and complexity later in the game in a December 2008 interview with 1up.com.[1]
- "The combat model doesn't have a lot of depth in the previous games. It was very much a "one-skill spam" kind of game, which I think works great for the Normal [difficulty] playthrough. I think most of the audience is just fine with that, and through most of the Normal difficulty, it's going to be like that. But as you go into Nightmare and Hell difficulties, I think that the more serious player will appreciate a game that's a little deeper on the combat-mechanic side."
Level of Difficulty
How hard they will be remains to be seen, and hasn't been much discussed by the D3 team. It's likely they haven't planned it out in that much detail; difficulty balancing is usually one of the later details to finalize, since it requires almost everything to be finished in the game and then extensive play testing.
We do know that many of the basic game changes in D3 have large effects on the difficulty of the game. There will not be many potions, life leech will be quite rare (or non-existant), and most healing will come from health globes. On the other hand, monsters won't be full of immunities and blessed with cheesy one-hit kills. The D3 team has discussed this issue several times, and always pointed out that the abundant potions and life leech made D2 characters essentially immortal. Death came only from cheesy super damaging kills, most of which were bugs, and that's no way to balance a game.
In D3 they want a much steadier progression of difficulty, so that monsters can be challenging, without being buggy insta-death dealers. The D3 Team has also talked about the difficulty ramping up smoothly. They want normal to be fairly easy, so new players can have success and find their way into the game. The D3 Team doesn't want D3 to be a total cakewalk, since that gets boring too, but they're not looking to turn normal into a tooth and nail struggle to survive. Nightmare and Hell? Perhaps.
BlizzCon Demo Difficulty
The only public play yet on Diablo III came at the BlizzCon event, in October 2008. That play time can't be analysed very closely for clues to the difficulty, since the demo was set up easier than the version of the game the D3 team has been testing. New characters started off at level 5 in the demo, even as they took on level 1 monsters. The D3 Team has acknowledged that the early going was fairly simple, and that the difficulty curve will ramp up slowly in the final game, but they do say that the game will become far more challenging on higher levels.
How challenging is not a question that can yet be answered, even in the abstract.