King Bali is immortalized because even Vishnu had to humble himself as Vamana to conquer him. He stands out for his valour and charity - two great eternal qualities.
Mahabali is believed to have ruled in South India before the Ramayana events and his empire is believed to have extended from the Vindhyas in the north to the far out in the south. His capital was Kerala. In the state of Kerala, the Onam festival is a celebration of the visit of Mahabali to their land. Bali is supposed to return every year to the land of his people, to ensure that they are prosperous.
Bali’s lineage is as under:
Marichi – Kashyapa (with Diti) – Hiranyakashipu – Prahlada – Veerochana – Bali
As the story goes, loking at the growing popularity and fame of King Bali the Devas become extremely concerned that the Daitya way might conquer the people. Vishnu decides to intervene and takes the fifth Maha Avatar known as the Vamana – a poor Brahmin boy (See my later post on the Mythical Timeline of Dashavataras to know more about the 10 Maha Avataras).
Now, while Bali is performing an Aswamedha Yagna at Kurukshetra (see this for more on Kurukshetra) in order to ascend Indra’s throne, Vamana comes to him and asks for 3 strides of land.
Just as King Mahabali agrees to grant the land much against warnings given by his guru Shukracharya, Vamana begins to expand. With his first step the Brahmin boy covers the whole of earth and with the other step he covers the whole of the skies. He then asked King Mahabali where is the space for him to keep his third foot.
The King realizes that he is no ordinary Brahmin. Mahabali bows before Vamana and asks him to place his last step on his head so that he could keep the promise to Vishnu.
The Brahmin is pleased, and he places his foot on the head and pushes him towards Patala, the nether world.
This is where Bali stays now. Vishnu also gives him immortality for his benevolence.
It is said that by another boon of Vishnu, Bali will be the next Indra (Purandara is the current Indra), that is, the eighth Indra (King of Devas) during the time of the eighth Manu, Savarni Manu.
As a footnote, this is all fine about Bali, but what about Vamana? Did he go back to his Sheshashayi Vishnu form? Some say he did, while others maintain that Vamana was so pleased with Bali that he decided to become the guard of the gate of Bali's realm Patala and remains so forever (this ending is seen most notably in Tulsidas' Ramayana).