As long as you know the IP address of whomever is hosting the game ie:
You are hosting, you'd need to give your brother the IP address for him to type in, and vice versa.
There is definitely LAN play, as I used to play D2 + LOD way back when with my little brother also ^_^
EDIT: Err, I forgot to mention. No, you do not have to play over the internet for a LAN game. As long as your computers are connected to the router, you should be able to join eachothers LAN games. I'm not too sure how to explain it though, because I'm hopeless with networking. I hope someone else chimes in here.
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