The word "Diwali" is derived from the Sanskrit word "Deepavali" meaning a "row of lights". There are various stories regarding the origin of Diwali. For this reason people celebrate Diwali in different ways the in different regions of the country.
Emergence of Lakshmi
The Diwali story of Lakshmi Puja goes like this. It is believed that Goddess Lakshmi manifested herself on the day when the demons and deities were churning the ocean together to find out the 'drink of immortality', Thus Diwali festival is celebrated to commemorate the birth of the Goddess of Wealth. Whatever the reasons may be, however, Diwali, has always been associated with the worshipping of Lakshmi.
The Victory of Rama
Diwali also commemorates the return of Lord Rama along with his
wife Sita and brother Lakshman from his fourteen year long exile
after defeating the demon-king Ravana. In joyous celebration of the
return of their king, the people of Ayodhya, the Capital of Rama,
illuminated the kingdom with earthen diyas (oil lamps) and burst
Krishna Killed Narakasur
Another Diwali legend talks about the Demon named Narakasur who had
managed to acquire such awesome powers. He was killed and defeated
by Lord Krishna. As a symbol of that victory Lord Krishna smeared
his forehead with the demon king's blood. Krishna returned home
early morning on the day of Narakachaturdashi.
The Legend of King Bali
There is another legend regarding Diwali. To curb King Bali's
powers Lord Vishnu visited him in the guise of a diminutive brahman
- "Vamana and pushed him down to the underworld. At the same
time, for his generosity, Lord Vishnu gave him the lamp of knowledge
and allowed him to return to earth once a year to light millions of
lamps in order to dispel darkness and ignorance and spread the
radiance of love and wisdom.
In Bengal, Diwali festival is dedicated to the worship of Goddess
Kali. Kali is the fearful and ferocious form of the goddess Durga.
The Return of the Pandavas
Diwali has its origin in Mahabharata too. In 'Kartik
Amavashya' the Pandavas appeared from their 12 years of banishment
as a result of their defeat in the hands of the Kauravas at the game
of dice (gambling). The subjects who loved the Pandavas celebrated
the day by lighting the earthen lamps.
Lord Ganesha the elephant-headed God, the symbol of auspiciousness
and wisdom, is also worshipped in most Hindu homes on this day.