Explain Iago’s initial plan to ruin Othello. How does that plan evolve and change over the course of Acts I and II?

From the outset of the play, it is clear that Iago has no love for Othello. He bitterly resents him for a number of reasons—not least of which is his being passed over for promotion. Iago reveals this openly to the hapless Rodrigo in act 1, scene 1:

Despise me
If I do not. Three great ones of the city
(In personal suit to make me his lieutenant)
Off-capped to him, and by the faith of man
I know my price, I am worth no worse a place.

As an old soldier himself, Iago's relatively lowly position in the military is a source of extreme bitterness and anger. As a result, Iago hatches a dastardly plan to gain revenge. He is going to destroy Othello by convincing him that his wife, Desdemona, is cheating on him with Cassio. Although we cannot sympathize with Iago's wicked plot, we can at least acknowledge a certain logic to it.
However, there is another side to Iago's hatred of Othello. Tellingly, he does not reveal it until Rodrigo has departed in act 1, scene 3:

I hate the Moor,
And it is thought abroad that ’twixt my sheets
He’s done my office. I know not if ’t be true,
But I, for mere suspicion in that kind,
Will do as if for surety.

Iago admits to a more personal reason for hating Othello—he has heard rumors that Othello has been sleeping with his wife. Iago does not have any evidence for this, but the merest hint of suspicion is enough. He is consequently moved to destroy Othello's marriage and promises the foolish, lovestruck Rodrigo that he will then be in a prime position to win over Desdemona.

Such is the depth of loathing that Iago has for Othello that his plan takes on a momentum all of its own, becoming ever more fiendish and unhinged. It is no longer enough for Iago to gain revenge on Othello for passing him over for promotion or—possibly—sleeping with his wife; he must hurt people simply for the sake of it because he actually enjoys ruining them and gets a kick out of the feeling of power it brings. Iago's lack of power and prestige in Venice makes him seek power elsewhere, turning him into a master manipulator of other people's emotions. If he cannot enjoy social prominence in the state, then he will wreck the lives of those who do.
There is an element of political subversion in Iago's sociopathic behavior; Venice has rejected him and has not given him what he considers his due. He is going to wreak a terrible vengeance on the city, destroying anyone he sees as representing the rigid social hierarchy that has kept him in such a humiliatingly lowly position. What started off as personal has become, by act 2, deeply political as well.