One morning before the other soldiers are awake, Perseus wanders off and find the sword lying the grass, glowing with a bright light.
Draco believes it is a "gift from the gods". Perseus refuses that he is Zeus's son and doesn't take the sword. Draco keeps it with him until Perseus wants it. It was left outside of Medusa'sLair with Io. When he returns with Medusa's head, Calibos attacks and slays Io. It is then when he decides to take the Lightning Sword and uses it to kill Calibos. After he returns to Argos on Pegasus and freezes the Kraken with Medusa's head, Perseus uses the sword to banish Hades back to the Underworld. The sword was most likely lost, but considering that in the alternate ending of the movie he has it (and the ending takes place after he had banished Hades), there is a possibility that he could retrieve it, summon it, or achieved it some other way.
In the video game's alternate ending, Perseus uses the blade on Mount Olympus against Zeus.
Capabilities
The Lightning Sword is the divine weapon of Perseus, he uses it to channel His lightning powers. The sword's compacted form is a small cylinder/baton which only at the touch of Perseus will glow and transform into its true sword form. It will revert into its dormant form unless he decides for it to stay in full form.The sword is so powerful it banished Hades back where he belongs; the Underworld:. In the Alternate ending, Perseus stabs Argos on the Olympian floor map, and either the weapon was powerful enough to disintegrate some of the figurines, or damaging the map can kill people or even perhaps remove them from Zeus' control:)
Notes
The Lightning sword is called Apollo's sword on the online microgame Medusa's Curse.
Baton of the Gods, the hilt's replica
The replica version of the Lightning Sword's hilt was named Baton of the Gods during merchandising.
