Gandalf is an Istari, which means, he is basically immortal. There are 5 Istari in total , the leader of them originally being Saruman the White (Thunder, your sp was awful), grandmaster Lee in the movie. Note that nor Gandalf nor Saruman were humans, they were Maia, an age-old race from another realm whose spirit was immortal.However, Saruman became corrupt, betraying the order. Gandalf did die,so to speak, when battling Balrog, but his spirit (his earthly body was destroyed) was sent back to finish his job (destroying Sauron) in the form of Gandalf the White, the wisest of the 6 Istari, the man who Saruman should have been.
Another interesting thing. Sauron was in the first age, only a servant (so was, btw Balrog) of Morgoth, the Archenemy (might be a name error here, I'm don't have Return of the King here, so I can't check the translation) who lived far up in the north. Maia were among those who battled him. The full story is told in the Silmarillion.