Sri Sathya Sai explains the inner significance of Deepavali - the Festival of Lights

Sri Sathya Sai celebrating Deepavali with students at Prasanthi Nilayam

Although man has come from Madhava (God), he is enveloped in a Bhrama (delusion) which obscures the Brahma (Divinity) within him. So long as one is in the grip of this delusion one cannot understand God. Because of this delusion one gets attached to the body and develops limitless desires. This leads to the growth of the Asura (demonic) nature in him. 

In the word ‘Nara’ meaning man, ‘Na’ means ‘no’ and ‘ra’ means ‘destruction’. So, the term ‘Nara’ describes man as one without destruction (that is, one who is eternal). When the letter ‘Ka’ is added to ‘Nara’ it becomes ‘Naraka’, hell, which is the opposite of heaven. When one descends to the demonic level, he forgets divinity and follows the path to hell. The Divine is realised by pursuing the spiritual path (the Atmic path).

According to the Puranic story, Narakaasura is said to have been destroyed on this day of Deepavali (Naraka Chathurdashi). Narakaasura was a demon filled with attachment to bodily pleasures. He was full of bad qualities like lust, anger and greed. He was a terror to women and perpetrated many evil deeds, inviting his own destruction at the hands of a woman, Satyabhama, the consort of Sri Krishna. It is worthy of note that the Lord gave this opportunity to Satyabhama only after subjecting her to a cleansing process to rid her of her pride and jealousy as revealed in the Tulabhaaram episode, where Satyabhama was advised by Narada to make a gift of Krishna to him and win Him back by offering an equivalent weight of gold and jewellery. When Satyabhama offered all the valuables she possessed, it had no effect. Ultimately a Tulsi leaf offered by Rukmini with a prayer to Krishna tilted the balance. Thereby Satyabhama was cured of her pride and jealousy.

An artist's impression of the war between Krishna-Satyabhama and Narakaasura

Apart from this Puranic version, there is a cosmic explanation for the observance of Deepavali. Naraka was a planet moving in orbit with the moon around the earth. Once it appeared to be heading towards the earth. People prayed to Lord Krishna to avert the impending catastrophe. The Lord had to take action to destroy this planet and save the world from disaster. From that day, Deepavali was being observed as a joyous day of deliverance from evil.

Source: Krishna, Chapter 6, Sai Vani: Avatar on Avatar Purushas