There are two questions here and here that concern the same diagram and result, but they seem to have to do with verifying the details of the diagram. I think I've handled that on my own.
(I have also checked Dummit and Foote p. 98, Aluffi p. 101, and the Wikipedia page on the isomorphism theorems, but none of them show a comparable diagram.)
My question has to do with the connection between $(G/K)(H/K) \cong G/H$ and the diagram. Specifically, is the diagram supposed to say the same thing as the $\cong$ statement? What is the intuition here? I feel like these two things are supposed to be connected in my mind, but at the moment they exist separately in my mind.
For context, the way I understand the $\cong$ statement is by following Lang's explanation that there is a surjective homomorphism $G/K \to G/H$ that has $H/K$ as its kernel. Applying the fact that $G/\text{ker } \phi \cong \text{im } \phi$ gives the result.
Excerpt:
Edit:
Looking at the diagram again, I see that we have two exact sequences that go $\text{trivial group} \to \text{kernel} \to \text{group} \to \text{image} \to \text{trivial group}$. But I still don't see the connection to the $\cong$ statement.

A sequence of the form, $$ 1 \to G_1 \to G_2 \to G_3 \to 1 $$ being exact (in the category of groups) is exactly the same information as,
(1) an inclusion $G_1 \subset G_2$ making $G_1$ a normal subgroup of $G_2$
(2) an isomorphism $G_2 / G_1 \xrightarrow{\sim} G_3 $
Explicitly, the exactness of the sequence says
(1) $G_1 \to G_2$ is injective
(2) the image of $G_1 \to G_2$ equals the kernel of $G_2 \to G_3$
(3) $G_2 \to G_3$ is surjective
Putting these together with the first isomorphism theorem gives what I claimed.
Lang's diagram shows that $(G / K) / (H / K) \cong (G / H)$ $\textit{via the given map}$ $G/K \to G/H$. So you get a bit more than the isomorphism you also get an explicit description of the isomorphism and the fact that the diagram commutes tells you this isomorphism is compatible with the "tautological" isomorphism $G/H \to G/H$ which is what the top row expresses.