Basically Odin heard a prophecy which said something bad would befall his son. Frigg (Baldur's mother in Norse lore) became so fearful that she went throughout the cosmos and got a promise from all things not to harm Baldur, except for the mistletoe, which she did not think would be harmful in any way. The other gods used his invulnerability to tease him, throwing pretty much everything they could think of at him. But Loki learned of his only weakness and tricked the blind god Hodr into shooting Baldur with a twig of mistletoe, which killed him.
After that, when they wanted to bring Baldur back from Hel, they were told that if they got permission from every living thing in the world, they could bring him back. Everyone but a giantess called Þökk (which means Thanks by the way) said yes, so Baldur did not come back from the underworld until Ragnarok. Unknown to everyone else, however, Þökk was actually Loki in disguise.
Loki was an asshole. I hope he pops up in God of War in the future.
