Every Indiana Jones movie needs its own weird mysterious artifact. Raiders has the Ark of the Covenant. Kingdom of the Crystal Skull has that refrigerator. And Temple of Doom has the Sankara stones.
Like all these artifacts, the Sankara stones are rooted in real-life lore. The Sankara stones are based on the "shiva linga," sacred symbols of Shiva. (Source)
Temple of Doom adds its own lore, saying that the stones have diamonds inside them. The promise of diamonds is what initially lures Indy and Willie into wanting to retrieve them. But the stones might as well be hollow inside, because they have no real bearing on the plot…unless the plot requires them to.
Indy magically makes the stones catch fire in a moment that makes no sense, which is saying a lot in movie where most of the lore makes no sense. Even George Lucas says they're "too esoteric" a word which here means "obvious plot device."