Type III hypersensitivity occurs when immune complexes are not adequately cleared, causing inflammation and attracting leukocytes. This can lead to immune complex diseases like lupus and rheumatoid arthritis. Serum sickness is a reaction to foreign proteins like in antiserums, while the Arthus reaction is a local hypersensitivity to antigen-antibody complexes depositing in tissues. Diagnosis involves routine blood and organ function tests, while treatments aim to suppress the immune response through steroids, immunosuppressants, or other drugs still under research.