From what I understand it works like this:
We all die. We all go to "Hades", which is the realm of the dead. Some place where the soul goes. The redeemed will go to Paradise/Abraham's bossom. The damned will go to Hell. Though they are both realms of the dead, there is a separation between the two. You can't move from Hell to Paradise, or vice versa.
When Jesus returns and judgement comes, we will all go before the Throne (both those who died before Judgement, and those who were alive at the coming of Christ). Those who are found in the book of life will be allowed into Heaven, where God reigns. Those who who were not in the book of life are cast in the lake of fire. Thos who go to Heaven will experience the full attributes of a Holy, Merciful, Loving God. Those who are cast into the lake of fire will experience his eternal wrath.
God will then create a new earth for us to dwell on and enjoy as he originally intended.