So how did all this come about? Well, Hercules started having these visions. Visions of his late best friend, Iolaus, warning him about the end of the world. After convincing himself that he wasn't just suffering the aftereffects of some bad rabbit stew, the Big Guy grasps Iolaus' hand and pulls him back into this world. And with a simple but very powerful "Hi buddy!" the Golden One was back. Needless to say, Herc was thrilled.
Iolaus tells Herc all about his being a Guardian of the Light. It's pure bliss. Well, all except the fact that there's no women, no food...and no women. Herc knows something must be really wrong for Iolaus to have returned. Sure enough, Iolaus informs Herc that the Light isn't too happy with mortals right now, and so has released the evils of the Four Horsemen of the Apocalypse, who bring with them War, Pestilence, Famine and Death. So the boys are back to business as usual, trying to stop the Four Horsemen and with them, the end of the world.
Iolaus explains to Herc that his warning about the end of the world could bring him real trouble from one of the other Guardians, Michael, who is the one releasing the Horsemen. Even though he knows he can't stay long, Iolaus works together with Hercules and, yes, even Ares to stop Michael and the Horsemen from bringing about The End.
Hercules does his demigodly best, but soon realizes that he is "way outta his league" and no match for Michael. The last Horseman, Death, is released, and Michael orders it to go after "the traitor" first. As Death comes barreling down on Iolaus, Hercules risks his own life by intercepting and wrestling with Death. They both fall over the edge of a pit into flames and burning lava. Iolaus watches his best friend die.
Suddenly Herc finds himself in a room with a smiling Michael. Guess what? The whole thing was a test. The fact that one man was willing to sacrifice his life for someone else was enough to halt the end of the world. But what about Iolaus? Herc asks. He's the one who risked his immortal soul to warn him. Where does that leave him? Michael nods and with a a wave of his hand, Iolaus appears beside Hercules, just thankful that the big guy is alive. Michael agrees that their strength of friendship also played a huge role in garnering mankind a second chance.
However...Iolaus MUST atone.
And Iolaus HATES atoning.
Yes, Michael announces that Iolaus' punishment will be his banishment from the Light...and his returning to earth to continue to fight by Hercules' side until he is once again ready to be judged by the Light. Needless to say, both Iolaus and Herc are thrilled. The big guy thanks Michael for letting Iolaus return to earth and Herc and Iolaus find themselves back in the village, ready to live out the rest of their lives together side by side and back to back.