Liches are former mortals who have died and become trapped between life and death. These tragic beings derive power from the necromantic energies that pervade the universe.
Just as Ner'zhul and his followers entered the Twisting Nether, they were ambushed by Kil'jaeden and his demonic minions. Using fel magic—the ways of the warlock, Kil'jaeden preserved Ner'zhul's spirit and transformed him into the Lich King. Ner'zhul's loyal death knight and warlock followers were also transformed by the demon's chaotic energies. The wicked spell casters were ripped apart and remade as skeletal Liches. These newly born liches possessed tremendous magical powers, yet their immortal, undead bodies were bound to the iron will of Ner'zhul. As payment for their undying loyalty to Ner'zhul, the Lich King granted them control over the furious elements of Northrend. Now, the liches wield frost magic along with their own considerable necromantic spells.
Liches bind their souls to a phylactery and then use the phylactery to generate a physical form; this process is why lich bodies look nothing like their mortal bodies, and also why you have to destroy a lich’s phylactery to truly kill them.