Everyone who's playing should have a copy of the game. The person who's hosting the game should be the person with the most stable internet conection and the highest spec machine. They need to go to the multiplayer menu and create a game there. Everybody else needs to know the IP address of the host and the name/password of the game as appropriate. Once they've all logged in the host can assign control of character slots to the other players who can then select any of their premade characters to play.
Once everyone is set up and ready to go you start in Jon Irenicus' dungeon with the host as the lead character (i.e. if he dies you have to restart).