It's the .MPQ files. Copy all the .mpq files that are on your LOD cd into your Diablo 2 install folder. There will be some .mpq files in the install folder on your computer already, but you need all of them off the cd, some aren't copied to your computer during the install process.
Once that's done your computer will spin up the cd once when you turn the game on, to check that the cd is in the drive, and then it wont need anything from the cd again.
-hps