All Hallow's Eve is the day before All Hallow's or All Saints' Day, which is a Christian holiday (holy day) honoring all of the saints–in particular, those who do not have a specific feast day of their own on the Christian calendar.
Because cultures around the world seem to recognize at least one day of the year when demons and the like run amok on earth, it's not surprising that Christians should also have such a designated day.
The specific date on the Christian calendar is probably related to a religious celebration–likely with the same theme–conducted by one or more of the indigenous pagan religions in Europe prior to the advent of Christianity.
Because demons, devils and other wicked things come to earth on this night, it is up to you to ward them off with bonfires and by other means, lest they do evil to you. In the middle ages, Hallowe'en was serious business; people actually worried about their safety.
Over time, some people eventually began dressing up as demons (dressing up for various holidays was actually quite common in the middle ages) and other people ritualistically bought them off with food offerings.
Of course, over time, we have become divorced from the religious practice and Halloween is now viewed as a secular holiday (although the term "secular holy day" is an obvious oxymoron).