Shinnok's fall from grace was caused by his lust for power and more specifically, his desire to take Earthrealm for himself.
At the dawn of time, when the realms were created, Shinnok desired to rule Earthrealm, and thus acquire for himself immense power. However, Shinnok couldn't enter Earthrealm without the Elder Gods being aware of his actions. To resolve this issue without directly defying the sacred rules, Shinnok created a powerful amulet, weakened the dimensional barriers, and entered Earthrealm. During the war against his fellow gods, he came into direct conflict with the thunder god Raiden.
While in the final stages of the war, Raiden was forced to choose between sacrificing Earth's indigenous races, or ceding the rule of Earthrealm to Shinnok. The Elder gods intervened, and assisted Raiden in his struggle. Raiden defeated Shinnok, and stripped him of his amulet and his status as an Elder God. Shinnok was then banished to the deepest regions of the Netherrealm. However, at the expense of Shinnok's defeat, the dimensional fibers of the worlds were severely weakened, and the Saurians - Earth's indigenous life form at the time - were nearly exterminated.
In the Netherrealm, Shinnok endured constant torture from the Netherrealm's overlord, Lucifer. Shinnok was at his mercy until he encountered a sorcerer, Quan Chi, who could travel through the realms at will. Quan Chi would aid Shinnok in overthrowing Lucifer and taking his throne, becoming ruler of the Netherrealm. As payment for Quan Chi's efforts, Shinnok endowed him with incredible powers, making him arch-sorcerer of the Netherrealm, and made him his most-trusted servant.
Shinnok began building his second army of darkness, and plotted to escape the Netherrealm once more. In order to do so however, he would need his lost sacred amulet. After centuries of searching, Quan Chi eventually discovered the amulet's whereabouts for him. It had been placed in a temple by Raiden, and guarded by four Elemental gods. Using the Lin Kuei warrior Sub-Zero, Quan Chi recovered it, but unbeknownst to Shinnok, he created a flawed replica in its place which he delivered, keeping the original for himself. In Deception, Shinnok sends Shujinko to retrieve the amulet and return it to him, claiming Quan Chi had left in a city of the Netherrealm. Once returned, Shinnok notices a "difference" in the amulet. Implicating it was Quan Chi's fake amulet returned.
His time in the Netherrealm was well spent, having built a massive army, as well as a fanatical cult of demons called the Brotherhood of the Shadow, dedicated to worshiping him. Also loyal to him was Tanya, an Edenian woman who became a traitor to her realm after she let Shinnok into the realm. He changed the Netherrealm's appearance as well, to make it look closer in appearance to Earthrealm.
Shinnok would ultimately be the catalyst for Shao Kahn's successful breach of Earthrealm. Years before, through Shang Tsung, the emperor of Outworld had bargained with Quan Chi to have Shinnok resurrect the soul of the Edenian queen Sindel upon Earthrealm, which would allow Shao Kahn to cross over to it from Outworld. In return, Shang Tsung had been the one to provide Quan Chi with the location of Shinnok's amulet. By the time Shao Kahn's forces were prepared, Sindel was resurrected, and Earthrealm was laid open. During Kahn's failed invasion, Shinnok ordered Noob Saibot to spy on these events and eventually sided with the Earthrealm warriors (Shao Kahn had also unsuccessfully attempted to invade the Netherrealm, which Shinnok had seen as a sign that the Emperor was becoming too powerful).
With the defeat of Shao Kahn and the retreat of the Outworld forces, Shinnok's Army of Darkness began its own assault on the realms. Its first target was Edenia. After successfully posing as a group of refugees, Shinnok and his highest generals, using Tanya's Edenian connections, were allowed entrance to the peaceful realm. Immediately, he seized this opportunity to bring in a full-scale invasion force, and captured Queen Sindel and Princess Kitana. After that, he began his attack against the heavens and there, he killed 3 of the 4 Elemental Gods (a weak Fujin escaped barely but was followed by demons and before the final blow by them, he was saved by Liu Kang and Kai).
Despite all these successes, the specter of doom arrived for Shinnok. The amulet he had was a fake, the real one in Quan Chi's hands. The sorcerer himself was captured by Scorpion and trapped in the Netherrealm. Raiden and his warriors defeated many of Shinnok's soldiers and the former Elder God faced Liu Kang in Mortal Kombat. Although the evil deity tried his best, he lost to the Shaolin Monk and Raiden ultimately banished Shinnok back to the Netherrealm.
In Mortal Kombat: Armageddon, it is revealed that Shinnok knew Taven and his family well before the start of Taven and Daegon's quest, as Taven is at first confused as to why an Elder God would reside within the realms. He calls upon Taven for help when being attacked by Li Mei in the Netherrealm, Taven ordering her to get away from "Lord Shinnok". Shinnok lied to Taven after Li Mei was defeated, claiming that he was no longer an Elder God because he "meddled in the affairs of mortals," and that, in his weakened state, he needed Taven to help clear out his sanctuary, which has been "overrun by demons." Taven completed this task, but alas, Shinnok was revealed to have easily deceived Taven, tricking him into kombatting images he conjured up himself. Shinnok tells Taven that Daegon (whom Taven was chasing) had already departed the Netherrealm after he defeated Shinnok's Kintaro and Sheeva illusions. With Taven gone, Shinnok was revealed to be aiding Daegon; Daegon was shown to be hiding behind Shinnok's throne the whole time. Shinnok began to doubt his choice in favoring the skills of Daegon immediately afterwards, claiming that Taven defeated his illusions much faster than Daegon did, and it was Shinnok who alerted the many combatants to the prize at the top of the Pyramid of Argus, telling them that whomever obtained this power would be granted godlike power.
In his Armageddon ending, it is stated that Shinnok created a copy of himself to assist Daegon in the Battle of Armageddon, but after Daegon's apparent death, the clone defeats Blaze himself, gaining as much power as the real fallen Elder God. The actual ending has it that this clone was indeed created and sent to fight in Shinnok's stead, but did not get to veer in objective, as it was killed off shortly after successfully killing Kung Lao.
Shinnok does not appear in Mortal Kombat vs DC Universe, but he is mentioned by Quan Chi to Shao Kahn, saying that Shinnok will be displeased by his failure to conquer Earthrealm.
Shinnok makes a brief cameo in the ending of Mortal Kombat (2011). Shinnok is pleased with his new plans coming to fruition thanks to the efforts of his powerful disciple Quan Chi. According to him, Shinnok himself will soon be free, and his dark forces will conquer Earthrealm and Outworld.