For example, in Nightmare, all players suffer a -50% reduction to all resistances. A lot of this comes from the fact that as you increase in difficulty levels, a lot of your stats are reduced. In fact, Blizzard did a very good job of making Act 5 harder than Act 4 of the same difficulty, but not so much that it was much harder than Act 1 of the next. In much the same way, the Acts also scale in difficulty. Additionally, uniques and champions have more modifiers when you encounter them (similar to in D3). In D2, many of them gain immunity to specific elements, and the likelihood that you would encounter a unique (yellow/gold monsters) or pack of champions (blue monsters) is increased. Just like in D3, as you go up in difficulties, creatures become much stronger. Being a fairly avid D2 player, I can tell you that it works in roughly the same way.
