Gong Xi Fa Chai...

The History and Origin of Chinese New Year
info from www.theholidayspot.com

One legend goes that the beast Nian had a very big mouth that would swallow a great many people with one bite. People were very scared. One day, an old man came to their rescue, offering to subdue Nian. To Nian he said, "I hear say that you are very capable, but can you swallow the other beasts of prey on earth instead of people who are by no means of your worthy opponents?" So, swallow it did many of the beasts of prey on earth that also harassed people and their domestic animals from time to time.

After that, the old man disappeared riding the beast Nian. He turned out to be an immortal god. Now that Nian is gone and other beasts of prey are also scared into forests, people begin to enjoy their peaceful life. Before the old man left, he had told people to put up red paper decorations on their windows and doors at each year's end to scare away Nian in case it sneaked back again, because red is the color the beast feared the most.

From then on, the tradition of observing the conquest of Nian is carried on from generation to generation. The term "Guo Nian", which may mean "Survive the Nian" becomes today "Celebrate the (New) Year" as the word "guo" in Chinese having both the meaning of "pass-over" and "observe". The custom of putting up red paper and firing fire-crackers to scare away Nian should it have a chance to run loose is still around. However, people today have long forgotten why they are doing all this, except that they feel the color and the sound add to the excitement of the celebration.