First off, it applies to all elemental damage whether it's from a spell or attack. The penalties/bonuses do not stack with multiple hits. Chaos is not an element, fire, ice, and lightning are the only elements. The way multiple elements at once work is that the penalty is applied to all the elements you hit with on the previous attack, and the bonus to the ones you didn't hit with on the previous attack. So if you hit with both fire and ice, on your next attack fire and ice will BOTH have penalties, but lightning will get a bonus. If you hit with one just one element, only it gets penalized, while the other two both get bonuses. If you hit with all three, all three will be penalized on your next attack.
The penalties and bonuses last for 5 seconds, or until they are overwritten with a new elemental equilibrium strike (ref). When soloing each of your hits will reset the resists/bonuses based on what you hit with.
The changed resistances will apply to all damage dealt to the target, whether it comes from you or your allies. However, only hits from you or your traps/mines/totems will trigger the effect - so you could for example attack with lightning damage to apply the effect while your minions or party members attack with cold and fire damage to make use of the lowered resistances.
No, multiple instances of the burning ground damage from Fire Trap will NOT stack.
Only different sources of burning damage can stack. For example, an Ignite debuff from a spell's critical hit and the Fire Trap ground burn will stack.
When 2 of the same burning sources are present the highest damage source will take effect. Multiple effects can still apply, like 2 Ignites on one mob, but only the highest damage one will actually deal damage.
Once the highest damage effect ends, if another instance of that effect was applied and still has duration left, it will then do what damage it has left. This goes for Righteous Fire, Ignite, and Fire Trap's ground burn effect. Searing Bond, a recently added skill, is an exception and the beams can stack with itself.
This is why you should try to spread out Fire traps a little bit whenever possible.
Posted by Mark_GGG, PoE developer and creator of the games skills and their mechanics.
...Ignite, RF, ground fire and now Searing Bond are all separate
sources of burning damage, and all stack. Ignite, RF and ground fire
do not stack with themselves (only the highest of each takes effect at
a time), but do with each other.
Searing bond beams stack.
As of Patch 1.0.5 Searing Bond Beams no longer stack.
Best Answer
If I had to guess, based on the fact that they took Conduit and various passives that improve curses and auras, I'd say maybe they were doing something of a support character for party play. They'd be giving good curses and auras, sharing charges, and giving all enemies -50% to ice and lightning resists.