At the end of act 3, after it has been made clear that Danforth is either unable or unwilling to discern the liars from the honest people, John Proctor declares that "God is dead!" And, further, he says that he can see the devil's "filthy face" and that it is his own face and Danforth's. In other words, Proctor realizes that it is no longer God who is in control of life in Salem but, rather, the devil himself. Temptation and dishonesty and greed rule where morality, truth, and goodness should. The court has everything backwards, holding up liars as saints and condemning honest folk as criminals.

Moreover, Proctor realizes that he has served the devil in choosing to protect his own reputation rather than coming forward with what he knows about Abigail much sooner, and he accuses Danforth of serving the devil now too. This is why he says that the devil's face is his own face and Danforth's own as well. Proctor insists that everyone running the court knows that "this be fraud," and yet they proceed with the trials and persecution of innocents anyway because it satisfies their desire for power, land, or both.

Now that Mary Warren has turned on him, now that he has revealed his own lechery and sinfulness, now that Hale quits the court and Abigail's word seems to be made law, Proctor says, "You are pulling heaven down and raising up a whore," meaning that Danforth and the others are ignoring God and acting as though this lying child is God. They blaspheme now, all of them joining him in sin.

At the end of act 3 of The Crucible, John Proctor first insists that "God is dead." Then he says:

A fire, a fire is burning! I hear the boot of Lucifer, I see his filthy face! And it is my face, and yours, Danforth! For them that quail to bring men out of ignorance, as I have quailed, and as you quail now when you know in all your black hearts that this be fraud—God damns our kind especially, and we will burn, we will burn together!

Finally, as the Reverend Hale denounces the court proceedings, Proctor cries out,

You are pulling Heaven down and raising up a whore!

Proctor has never been a particularly religious man, but he does believe in justice. It is therefore fitting that his revelation of hell takes place not in a church but in a courtroom, where he sees injustice triumphing. His first comment may appear to conflict with his second; immediately before telling Danforth that God will damn them or has damned them, he has said that God is dead. However, logical consistency is not to be expected from one in Proctor's mental state at this stage. Moreover, the ideas expressed about the key concept of justice are compatible with one another. Divine justice is dead, but Danforth is failing in his obligation to provide earthly justice, and they will both suffer for it as Salem becomes a hellish place in which the devil and his works have triumphed.

Proctor's final comment refers to Abigail in particular as an agent of the powers of darkness. If God is the ultimate symbol of truth and justice, Abigail is the opposite, since she is continually lying and doing so to bring about injustice. Giving her the power to condemn innocent people to death is raising up falsehood over truth. The irony of Proctor's precise words is that Abigail's "whoredom," which is to say, her misconduct on a purely sexual level, was with Proctor himself.

When Danforth demands that Proctor confess to witchcraft, John Proctor responds that “God is dead” and they will all burn in hell together.  He says this because the people of Salem are the ones committing sins by continuing the hysteria of the witch trials.

At the end of Act 3, Deputy Governor Danforth asks John Proctor if he is going to confess to witchcraft, saying “I have seen your power; you will not deny it!” (Act 3, Scene 3).  Proctor replies that “God is dead!” and continues while laughing insanely.

A fire, a fire is burning! I hear the boot of Lucifer, I see his filthy face! And it is my face and yours Danforth! God damns our kind especially and we will burn, we will burn together! (Act 3, Scene 3)

It is ironic that Proctor is accused of witchcraft, because he was against the witch trials from the beginning. The play "pits Salem’s authority structure, as typified by Deputy Governor Danforth with his smug self-righteousness, against its helpless individual victims" (enotes, Salem on literature, see third link).  Proctor has tried to convince the others of the pointlessness and damage of the trials, and they have not listened, but he has become a victim himself.

Danforth is power-hungry and incompetent.  His reaction to Proctor demonstrates how low he will stoop.  Proctor realizes that he cannot get out of this situation, and Danforth will not back down.  Proctor’s only choice is to give in—but go down fighting.  He does this by making his harsh comments about the Devil taking all of them to Hell.  The people of Salem supposedly fear the Devil, but they are acting in his stead by killing innocent people or ruining their lives.

At this point, Proctor's life has completely fallen apart.  He has confessed to having an affair, but his wife has lied.  He has tried to get others to tell the truth, but avoided telling the truth himself.  Once he finally does, no one believes him.  Proctor’s maniacal laughing is his breaking point, showing that he sees the walls closing in and is losing control.