There's different stories behind this day, but the most basic is the victory of good over evil. Another popular one is that Lord Rama went to Sri Lanka to rescue his wife, Sita, from the demon Ravana. The people loved him so much that when he got back they all lit lamps and danced and celebrated throughout the night. It's typical to give sweets and new clothes as gifts to everybody. Employers also give a 2 week bonus with which to purchase new things, but unfortunately many people (well, the men) spend it on alcohol. Apparently it gets pretty crazy!
This is probably my last post for a while, because we leave to go travelling in two days and I won't have much internet access for three weeks. I'm very excited!!