Bearing the title of the God of Mischief, Loki is a demigod in Norse Mythology. Loki, despite being the son of Fárbauti, a jotunn, was raised by Odin along with Odin's biological son, Thor, the God of Thunder. As an on-and-off friend or enemy of the gods (especially Thor, whom is initially his friend, but whom degenerates in to one of his most bitter enemies), he is also a shapeshifter, and a myriad of his forms are present throughout the surviving Norse texts. As a shapeshifter, he is also the father (and arguably mother in some cases) of a variety of other Norse mythological characters, including Hel, Jörmungandr (the world serpent), Odin's horse Sleipnir, and Fenrir the wolf.
There is another unrelated Loki in Norse myth, the jotunn Utgard Loki. While he is involved in an amusing tale which results in some degree of humiliation for both Utgard (via a loss in a meat-eating contest against personified fire) and Thor (via losses in several additional rigged contests), he is not the same being and should not be confused as such.
The Death of Baldr
Ultimately, Loki goes too far when he cleverly leads the gods to the death of their favored son, Baldr. Beloved by the gods for his youthfulness, one day Baldr has a prophetic dream of his own death. This worries his mother, Odin's wife Frigg, who travels about the land asking all living creatures not to harm her son. However, she passes over the mistletoe plant, as it seems small and insignificant.
The gods then throw a party, the main event of which is a hurling of objects at Baldr, who is now nigh-impervious; all objects thrown simply bounce off of him. However, Loki makes a spear out of the mistletoe plant and gives it to the blind god Hodr, who throws the spear and kills Baldr. The stunned gods slay Hodr and burn Baldr's body on a pyre. A broken Frigg pleads to the death goddess Hel to allow her son to return to the living; she agrees only on the account that all living things would weep for Baldr's death. This was accomplished except for a sole giantess who refused. This giantess was revealed to be Loki in disguise.
For this crime he was given a most terrible sentence: to be bound deep underground with chains made from the inner organs of one of his sons, directly beneath a serpent placed by Skadi whose teeth were so venomous that poison literally dripped off its fangs and onto Loki's face, causing agonizing pain. There he would be left for all eternity. Loki's wife Sigyn is the only one among the gods to object to this sentence and stands at his side, catching the venom in a magically deep bowl so that he does not have to suffer constantly. However, the bowl inevitably fills up from time to time, and Sigyn must leave Loki in order to empty it. During these times, Loki writhes in such agony from the venom that his struggles against the chains cause earthquakes in the world of man, Midgard.
Loki breaking free is one of the signs of the onset of Ragnarok, the end of the world. Joining Surt, Fenrir, Garm, and other forces of evil, they march against Asgard and the Aesir, leading to mortal war. Loki is destined to fight Heimdall at Ragnarok, but the two end up destroying each other.