Loy Krathong is held on the full moon of the 12th month in the traditional Thai lunar calendar. In the western calendar this usually falls in November.
"Loi" means "to float". "Krathong" is a small raft traditionally made from a section of banana tree trunk, decorated with elaborately-folded banana leaves, flowers, candles, incense sticks etc. During the night of the full moon, many people will release a small raft like this on a river. Governmental offices, corporations and other organizations also build much bigger and more elaborate rafts, and these are often judged in contests. In addition, fireworks and beauty contests take place during the festival.
The festival probably originated in India as a Hindu festival similar to Deepavali as thanksgiving to the deity of the Ganges with floating lanterns for giving life throughout the year.
According to the writings of H.M. King Rama IV in 1863, the originally Brahmanical festival was adapted by Buddhists in Thailand as a ceremony to honour the original Buddha, Siddhartha Guatama. Apart from venerating the Buddha with light (the candle on the raft), the act of floating away the candle raft is symbolic of letting go of all one's grudges, anger and defilements, so that one can start life afresh on a better foot. People will also cut their fingernails and hair and add them to the raft as a symbol of letting go of the bad parts of oneself. Many Thai believe that floating a krathong will create good luck, and they do it to honor and thank the Goddess of Water, Phra Mae Khongkha.
The beauty contests that accompany the festival are known as "Noppamas Queen Contests". According to legend, Noppamas was a consort of the Sukothai king Loethai (14th century) and she was the first to float decorated krathongs.
The Thai tradition of Loy Kratong started off in Sukhothai, but is now celebrated throughout Thailand, with the festivities in Chiang Mai and Ayutthaya being particularly well known.
In Chiang Mai Loi Kratong is also known as "Yi Peng". Every year thousands of people assemble to float the banana-leaf krathong onto the waterways of the city, honouring the Goddess of Water. A multitude of Lanna-style hot-air lanterns (khom fai) are also launched into the air where they resemble large flocks of giant fluorescent jellyfish gracefully floating by through the skies. These are believed to help rid the locals of troubles and are also taken to decorate houses and streets.