On this day, the Celts believed the dead came back amongst the living to seek redemption.   The sinful souls were forced to take the bodies of animals and through animal sacrifice, their spirits were released from their animal bondage to seek a higher reward.  In pagan times, horses and humans were commonly sacrificed.  Later black cats were sacrificed because they were thought to be friends of witches. 

In the eighth century, Pope Gregory III declared November 1 as All Saints Day to honor the sanctity all the saints.  The evening before All Saints Day became known as a day favored by witches, sorcerers, and evil spirits.  While all religious relationships have passed, many of the typical pagan traditions remain.

The practice of dressing up in costume begging for food goes back to the pagan New Year's feast.  During the feast, it was believed ghosts hung around the tables of food.  As soon as the feast was over, the people would dress up in costumes representing the dead to drive the spirits out of town.  There are other explanations of the costumes relating to All Saints Day.

The history of the "trick" from "trick or treat" probably relates to Mischief Night.  There was an old belief that ghosts and fairies roamed the roads on Halloween night curdling milk and doing other mischievous things.  

Today it is a holiday with no religious significance nor serious evil connotations.  It is rather a holiday of fun and treats for children.  Children dress up in both scary and silly costumes and go door to door asking for candy.  Aside from Christmas, it is probably every child's favorite holiday.