He has not always been a demigod. He was a Chimer (what the Dunmer/Dark Elves used to be) until he and two of his fellows used the tools of a Dwemer craftsman named Kagrenac to tap into the power of the Heart of Lorkhan and make themselves godlike figures. This action is what caused Azura to curse the Chimer and make them Dark Elves, with their grey skin and red eyes. Vivec's goal (not sure whether or not Sotha Sil and Almalexia actually shared this goal) was to rule Morrowind as benevolent gods and usher in another golden age for their people.