Hell is a state of a soul that hates God and is now living in separation from Him. Hell was created at the fall of the demons, or better phrased -- was created by God for demons, since they are the ones in permanent opposition to God, and not the other way around.
Actually, hell is not exactly a creation, but rather a spiritual void in which demons now dwell (some are on earth, and some in the ether).
All the people who hate God will have to live in this spiritual void and they will be tormented according to whatever passions they are not able to fulfill anymore, since this void removes any possibility of sin. Also, God's love burns them (to be understood in spiritual terms), since those in hell know that it is Love that they sinned against. In other words, they are truly evil, so God who is Love had to cut them off from Him, but they can't handle the fact that Love would do that. It's as if they never thought it would come to such a radical decision given how infinite and gentle God's Love is, yet, they did go too far and provoked the unthinkable. It's a paradox that even though demons gave birth to their own hell, they totally hate it at the same time.