In Diablo 2, units exist and move around on a grid of tiles. These tiles are oriented diagonally to the screen viewport, to make up the game's isometric view. Here are some details about that, and practical effects relating to certain spells and skills.

Characters and most monsters occupy an X-shaped footprint of five tiles on the game grid, as illustrated here. This has effects for the optimal use of some skills.

Fire Wall: You want to cast this spell so that the wall is oriented in a direction that is orthogonal to the game grid (diagonal to the screen.) As shown here, a monster will get hit by three tiles of Fire Wall's missiles if it's aimed correctly, across the wide span of the X. The difference in damage is very noticeable when you do this correctly, rather than casting in a grid-diagonal direction where the wall will hit only the center tile of the X.

Molten Boulder behaves the same way. You want to bowl in a grid-orthogonal / screen-diagonal direction, so that the boulder will cross over the full length of the three-tile span of the X.

The wings of the X for each unit can overlap with the wings of the X for other units. The center squares of each X can't overlap with anything (except when you teleport multiple friendly units.) So normally, units can be positioned close to each other in the possible orientations as shown here. This affects the optimal use of some skills also, as follows.

Charged Bolt and Charged Strike: You want to cast these spells when you are standing adjacent to the target in a grid-diagonal / screen-cardinal orientation, as shown on the lower-right example here. If you are standing adjacent in a grid-orthogonal direction, you are really standing two tiles away from the target, and so there's room for some of the bolts to miss the target and wander off. If you're standing adjacent in the desired grid-diagonal direction, the wings of the target's X are wrapping around your center tile, so every bolt that spawns on your tile will collide with one of those three tiles of the monster.

Firestorm behaves similarly, although the effect is less pronounced.

Tornado and Twister: I believe these behave the same way as well, although haven't tested extensively.

All of this works in the other direction as well, with monster skills relative to your character. If you are being targeted by fire walls from ghoul lords, you will take less damage if you stand in a grid-diagonal / screen-cardinal orientation to them, so that their firewall will cross over only the center tile of your X. Grid positioning also matters for the charged bolts released by lightning-enchanted bosses; you will take fewer hits from them if you stand in a grid-orthogonal / screen-diagonal direction, so that the wings of your X aren't adjacent to the source and there is room for some of the bolts to wander off and miss.

Finally, Fissure also has an effect related to overlap, although it depends on multiple monster targets overlapping with each other rather than you overlapping with a monster. Fissure's missiles have a property named LastCollide, which means each one remembers the last monster it hit and won't hit it again. But if multiple monsters are overlapping on the same tile where a Fissure missile is, that missile will very rapidly alternate between hitting both targets and deal damage very quickly. You can't really force this to happen with your positioning, but it is very noticeable when you get to take advantage of it.