"Always on" DRM means the player must have a consistent Internet connection or be booted from the game. If the connection drops, so does the game. It doesn't matter whether the player is in single player or playing cooperatively. The internet connection must remain firm to play the game, not to mention Blizzard's servers which must handle a load from everyone trying to hack 'n slash their way through dungeons at the same time.
Rob Pardo, Blizzard's executive producer tries to explain the reasoning, stating that previous Diablo games had players leveling up offline, then jumping online to play with friends. There was no means of telling whether or not the character was legitimately powered-up, or the player cheated their way to internet fame.
In Diablo III, all characters are saved on a server, meaning hours of gameplay could be reset if the server has issues or someone hacks into it., Pardo continues, "Your character will be online on battle net the moment you start playing. You can play a solo experience like you would in Diablo II, it's just your character is on Blizzard's servers and authenticated."
What this doesn't explain is why there failed to include an offline option, letting the player save the character they created and earned on their own hard drive. If they want to play on Blizzard's online service, Battle.net, then induce the restriction. Why is that so hard?