But there are more than one Hindu mythology events that drives this colorful festival. Lets put some light how are those mythological events and how they drives this festival.
First event: In mythological period, there was an evil king named Hiranyakashipu. He forbade his son Prahlad who was a believer of God, from worshipping Vishnu (God). The king tried several cruel efforts to stop his son but Prahlad continued to do offer prayers to the god. Getting angry with his son, Hiranyakashipu challenged Prahlad to sit on a pyre with his wicked aunt Holika who was believed to be immune to fire. Prahlad accepted the challenge and prayed to Vishnu to keep him safe. When the fire started, everyone watched in amazement as Holika was burnt to death, while Prahlad survived without a scar to show for it. The burning of Holika is celebrated as Holi. According to some accounts, Holika begged Prahlad for forgiveness before her demise, and he decreed that she would be remembered every year at Holi.
Second Event: Lord Shiva, one of the major Hindu gods, is known for his meditative nature and his many hours spent in solitude and deep meditation. Madana, the God of love, decided to test his resolve and appeared to Shiva in the form of a beautiful nymph. But Shiva recognized Madana and became very angry. In a fit of rage he shot fire out of his third eye and reduced her to ashes. This is also sometimes given as the basis of Holi festival.
Third event: The festival of Holi is also associated with the enduring love between Lord Krishna (an incarnation of Vishnu) and Radha (Krishna's love interest). According to legend, the young Krishna complained to his mother Yashoda about why Radha was so fair and he so dark. Yashoda advised him to apply colour on Radha's face and see how her complexion would change. Because of this associated with Krishna, Holi is extended over a longer period in Vrindavan and Mathura, two cities with which Krishna is closely affiliated.
The first and second event definitely work as a basis of the Holi bonfire. On the evening of the first day of Holi, a public bonfire is held, commemorating the burning of Holika. The fire is lit sometime between 10 PM and midnight (at the rising of the moon). But the central ritual of Holi is the throwing and applying of colored water and powders on friends and family, which gives the holiday its common name "Festival of Colors". This ritual is said to be based on the above story of Krishna and Radha. Krishna's followers everywhere find special meaning in the joyous festival as the color play is considered to be in imitation of Krishna's play with the gopis (wives and daughters of cowherds) including Radha. But most of all it celebrates the coming of spring with all its beautiful colors and vibrant life.
In Bengal region, Holi features the Dolayatra (Swing Festival), in which images of the gods are placed on specially decorated platforms and devotees take turns swinging them. In the meantime, women dance around and sing special songs as men spray colored water at them.
Context is different, way of celebration is different! But the whole India celebrates this occasion with equal passion & vivacity. People celebrates this occasion overcoming the different social norms. That is what really signifies the importance of this festival in our life.