Halloween had its origins in the festival of Samhain among the Celts of ancient Britain and Ireland. November 1 was considered the end of the summer period, the date on which the herds were returned from pasture and land tenures were renewed. It was also a time when the souls of those who had died were believed to return to visit their homes. People set bonfires on hilltops for relighting their hearth fires for the winter and to frighten away evil spirits, and they sometimes wore masks and other disguises to avoid being recognized by the ghosts thought to be present. It was in these ways that beings such as witches, hobgoblins, fairies, and demons came to be associated with the day.
Taken from the entry for Halloween in Encyclopedia Britannica Online
Fun Facts expanding upon the Samhain festival:
In a hard driving society like the United States, holidays are islands of softness. Holidays are times for creating memories and for celebrating cultural values, emotions, and social ties. All Together Now considers holidays that are celebrated by American families: Easter, Memorial Day, Independence Day, Halloween, and the December holidays of Christmas or Chanukah.
Boasting a rich, complex history rooted in Celtic and Christian ritual, Halloween has evolved from ethnic celebration to a blend of street festival, fright night, and vast commercial enterprise. In this colorful history, Nicholas Rogers takes a lively, entertaining look at the cultural origins and development of one of the most popular holidays of the year. Drawing on a fascinating array of sources, from classical history to Hollywood films, Rogers traces Halloween as it emerged from the Celtic festival of Samhain (summer's end), picked up elements of the Christian Hallowtide (All Saint's Day and All Soul's Day), arrived in North America as an Irish and Scottish festival, and evolved into an unofficial but large-scale holiday by the early 20th century.