First we must understand that a new dispensation, which we call the "Millennium," will begin after Jesus sets up His kingdom on earth. You've probably haven't heard much teaching on this subject, but many Scriptures talk about this time period. (I recommend Mark Hitchcock's book 101 Answers to the Most Asked Questions About the End Times for further study.) Why is the devil released? Here are some facts that you need know:
1. The saved people who are alive at the Second Coming will enter Jesus' kingdom on earth in their natural bodies. (Matt. 25:34, Zech. 14:16)
2. Jesus will be king over the entire earth (Zech. 14:9, Ps. 2:6). This isn't taking place in heaven, but on earth.
3. The people who survived Armageddon will begin repopulating the earth. Isa. 65:20,23 says, "No longer will there be in it an infant who lives but a few days...for the youth will die at age one hundred and the one who does not reach the age of one hundred shall be thought accursed...They shall not labor in vain or bear children for calamity, for they are the offspring of those blessed by the Lord." Satan is bound in hell during this time, but the people born during the Millennium will have a sin nature and will need to be saved. They must place their faith in Christ as their Savior, just as we do today.
4. The people living on earth during that time will be required to go to Jerusalem once a year to worship Jesus (Zech. 14:16). However, some people will refuse to go there and worship Him! (Zech. 14:17-18).
5. By the end of the 1,000 years, the planet will be covered with people. "The number of them is like the sand of the seashore" (Rev. 20:8). These people will have a sin nature but have never been tempted by Satan. So why is the devil released from the abyss? It's to test the people born during the Millennium to determine which side they are on.
"And [Satan] will come out to deceive the nations which are on the four corners of the earth" (Rev. 20:8).
Suddenly, the people on earth are faced with temptations they didn't have before, as the devil and his demons bombard them with rebellious thoughts. They surround Jerusalem in an attempt to overthrow Jesus and His throne. Immediately fire comes down and destroys them (Rev. 20:9). Satan is thrown into the lake of fire forever (Rev. 20:10). This time he won't get out.
To hear the entire message, go to http://www.churchoflivingwater.net/node/23 and click on "End Times pt 7: Life in the Millennium"