Laser diodes are very sensitive devices and can be ruined very easily. Some common reasons for failure are too much current, overheating, and electrostatic discharge. They must be driven with a current source that suppresses transients and regulates the current to avoid putting too much current through the device.
Store diodes in static-free bags, and short the pins together until they are connected to a driver. Use an ESD wrist-strap when handling diodes.
Start at the lowest possible current setting and gradually turn it up. It is safer to set the current first with a test load that has a similar voltage drop to your diode, but be aware that when you switch to the laser diode, the actual current may be a bit higher or lower than you set with the test load.
Very important: right before connecting the laser to the output of the driver, short the output terminals of the driver together. This prevents any built-up charge from damaging the laser. This is especially important for linear drivers which often have a capacitor filtering the output.
Care should be taken when soldering to avoid overheating the device. Do not use temperatures over 570° F or leave the soldering iron on the leads for more than 10 seconds. It helps to have the diode in a heatsink already before soldering to the pins. If possible, try to order diodes that are already in a housing with wires attached, because it is very easy to run into problems in this process.