The word Diwali has been derived from Deepavali which in turn is formed by dipa + avali (row). Deepavali is thus a line or a row of lamps. During Diwali, lamps are lit everywhere. It is celebrated on four consecutive days - the thirteenth day (Dhanatrayodashi), the fourteenth day (Narak chaturdashi) and the new moon day (amavasya) [Lakshmipujan] of the dark fortnight of Ashvin and the first day of the bright fortnight of Kartik (Balipratipada). Some exclude the thirteenth and consider only the remaining three days as Diwali. Since Vasubaras and Bhaubij respectively precede and follow Diwali, they are included in it. However in reality they are separate holy festivals.

The most repeated version is that Hindus celebrate Diwali to mark the time when Lord Rama achieved victory over Ravana. Some also view it as the day Krishna defeated the demon Narakasura or in honor of the day Bali went to rule the nether-world, obeying the order of Vishnu. It is also a significant festival for the Sikh faith. In India, Diwali is now considered to be more of a national festival, and the aesthetic aspect of the festival is enjoyed by most Indians regardless of faith.

This is the day when worship unto Mother Lakshmi is performed. Hindus cleanse themselves and join with their families and their Pandit (priest) and they worship the divine Goddess Lakshmi to achieve the blessings of wealth and prosperity, the triumph of good over evil and light over darkness.

Gifts are exchanged and sweets, festive meals are prepared during Diwali. Because there are many castes and regions in India, there are myriad manifestations of the Diwali festival.