It is most popular in Ireland, where it originated, also known as "Samhain Night". The Celts celebrated Halloween as Samhain, the 'Feast of the Dead',.
The Celts believed that at this time the spirit world could intermingle with the living, and that the spirits would could come down to earth in order to posses the living and find a new body for the new year. The living did not want to become possessed so they would not light fires so everywhere looked undesirable, and they would dress in scary costumes in order to scare away the spirits, and would go parading around as noisily as possible.

(It is still believed by many that this is the most popular night to contact the dead, and as links with the occult )In Ireland they continued to practice the ancient pagan ritual even after the arrival of Christianity in the sixth century. But in 609 Pope Boniface IV, declared May 13 All Saints' Day. While pagans were happy to add All Saints' Day to their calendar, they were unwilling to give up their existing festival of the dead and continued to celebrate Samhain.
 Intent on getting rid of pagan beliefs, Pope Gregory III followed in the footsteps of the earlier Christian leaders and united the Christian All Saints' Day to the festival of Samhain. He then moved All Saints' Day to November 1, which became known as All Hallows. Because Samhain had traditionally fallen the night before All Hallows, it eventually became known as All Hallows' Eve' or Hallowe'en.
Halloween was first seen in America when Irish immigrated fled there in the 1840s due to the potato famine. It is not quit sure when it came to Britain.
It is thought that Halloween did not become so wide spread until the 20th century. Over time the practice as changed as the belief in the spirits possessing bodies changed, and it as become less of a ritual and as become more ceremonial.
 

Customs of Halloween
 

Trick or Treating - thought to have come from when November 2nd was a celebration called All Souls Day, on this day Christians would go round begging for 'soul cakes' it was believed the more cakes they got the prayers they would promise to say on behalf of their dead relatives, because it was believed that after death the dead would remain in limbo for awhile, so prayers even by strangers would help them on their path to heaven.

Jack o' Lantern - probably came from Irish folklore, the story goes that Jack who was trickster and no gooder, He tricked the devil up a tree, once he was there Jack put crosses around the base of the tree and he made the Devil promise that he would never tempt him again, before he would allow him come down the tree, this the devil promised so Jack let him down, after Jack died he was refused entrance to heaven because of his evil ways, and the Devil refused because of the way he was tricked, Jack was given an ember of coal which he put in an hollowed out turnip, to light his way in the darkness.

Turnips were originally used on Halloween but when the custom went to America pumpkins were more plentiful and easier to calve so they replaced the turnip.

Ghosts and skeletons - long since been the symbol for the dead and as it was originally Sahain (festival of the dead) it seems appropriate to use them

Spiders and webs - they represent the dark spooky places and haunted houses where many spiders choose to weave their webs.

Black cat - symbol of bad luck as many people have always associated them with the occult and that they have the ability to sense spirits.

Other things that are now associated to Halloween are -

Apple bobbing, where apples are placed in water and they have to be retrieved without using your hands with your teeth and sweets and small change are now the most popular things that are given out when people go trick or treating.