Most likely this verse is an allusion to “sons of God” mentioned in Gen. 6:4 who came to earth. and married women. This is explained in 1 Enoch 7; 9:8; 10:11, 12:4. The book of Enoch is significant in interpreting this verse because Jude quotes from it in Jude 14 and this book was important to the understanding of that passage in Intertestamental literature and the writings of the Early Church Fathers.
These angels were rebellious, refusing to keep their “positions of authority,” apparently a reference to God’s assignment of spheres of responsibilities (archein) in specified realms or places (oikeiteirion). The implication here in context is that the angels refused to keep their proper places because of pride and lust. If indeed the fall of the king of Babylon (Isa. 14:3-23, esp. Isa. 14:13-14) is a picture of the fall of Satan, then it is clear that pride played a significant part in it. The pride that drove the fallen angels is what drives the false teachers to abandon the truth of the Gospel in favor of their own wisdom.
The relevant portions of 1 Enoch do not mention lust specifically in relation to the angels, though they do mention that these angels “defiled” themselves (1 Enoch 9:8; 10:11) and taught humans, apparently the women, “all kinds of sins” (1 Enoch 10:11). It is interesting to note that it is immediately after the events related in Gen. 6:4 that the Lord sees the greatness of man’s wickedness (in Gen. 6:5). Jude does seem to have this in mind in relation to the false teachers since he mentions sexual immorality in the very next verse using a “these” that can only refer to the angels in this verse. Jude also mentions in Jude 8 that these false teachers “defile the flesh” and describes them as “sensual persons” (Jude 19) who walk “according to their own lusts” (Jude 16, 18). [The word “these” in Jude 7 is masculine and so cannot refer to the “cities” of the same verse since “cities” is feminine. The nearest antecedent is the “angels” in Jude 6.)
So, then, one may conclude that the rebellion of these angels involved not only the refusal to continue in the areas of responsibility God had ordained for them, but also abandoning the spheres or realms they were supposed to inhabit so that they could pursue human women sexually. It is this rebellion that resulted in God’s placing certain (though certainly not all) of the angels under chains and in darkness until the Day of Judgment. This apparently involves torment and punishment now and following the Day of Judgment. The Scriptures do not reveal why all fallen angelic beings are not under chains.