AFAIK, Halloween is a blend of many things...
The druids (Celts, in some fashion were druids) had a holiday in which they called "Samhayne" (very many different spellings on this word) in which one of their gods dies. In his passing between worlds, he weakened the veil between the world between the living and the dead. Thus, on Halloween night (although, I do not believe that Samhayne was celebrated on the same day we celebrate Halloween -- it was sometime in October, however) ghost both good and bad roam the streets. It was a time where families left extra food on the table, to welcome old ancestors back to dine with them. However, if you stepped out of the house, people usually tried to dress like someone else -- to avoid vengeful spirits. Common "disguises" included stuff like...cross-dressing, and dressing like a ghost. Hence, the costume part of Halloween.
If I remember correctly, they would also hang certain decorations from window sills, primarily for superstitious purposes of "warding" bad spirits away. While, I think originally they used some sort of root; this tradition is believed by some to have been the origins of the Jack-o-lantern. The traditional is probably most closesly preserved from its original form as it evolved into today's Spanish/Mexican holiday: The Day of the Dead.
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I don't have sources on my info...I did some research several years ago as part of a project to join some groups in an online game... Thus, everything I read was from random websites -- which aren't very reliable as far as sources of information... BUT, within my small group, the above information was widely accepted.
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