Why do hindu people celebrate the festival of holi?

I think asker is referring to the festival of Holi.

It’s a festival of colors.

In Vaishnava Theology, Hiranyakashipu is the king of demons, and he had been granted a boon by Brahma, which made it almost impossible for him to be killed. The boon was due to his long penance, after which he had demanded that he not be killed “during day or night; inside the home or outside, not on earth or on sky; neither by a man nor an animal; neither by astra nor by shastra”. Consequently, he grew arrogant, and attacked the Heavens and the Earth. He demanded that people stop worshipping gods and start praying to him. Despite this, Hiranyakashipu’s own son, (Prahlada), was a devotee of Lord Vishnu. In spite of several threats from Hiranyakashipu, Prahlada continued offering prayers to Lord Vishnu. He was poisoned but the poison turned to nectar in his mouth. He was ordered to be trampled by elephants yet remained unharmed. He was put in a room with hungry, poisonous snakes and survived. All of Hiranyakashipu’s attempts to kill his son failed. Finally, he ordered young Prahlada to sit on a pyre on the lap of his sister, Holika, who could not die by fire by virtue of a shawl which would prevent fire affecting the person wearing it. Prahlada readily accepted his father’s orders, and prayed to Vishnu to keep him safe. When the fire started, everyone watched in amazement as the shawl flew from Holika, who then was burnt to death, while Prahlada survived unharmed, after the shawl moved to cover him. The burning of Holika is celebrated as Holi.

http://en.wikipedia.org/wiki/Holi#Traditional_Holi