While Diwali is popularly known as the "festival of lights", the most significant spiritual meaning behind it is "the awareness of the inner light". Central to Hindu philosophy (primarily the Yoga, Vedanta, and Samkhya schools of Hindu philosophy) is the belief that there is something beyond the physical body and mind which is pure, infinite, and eternal, called the Atman. The celebration of Diwali as the "victory of good over evil", refers to the light of higher knowledge dispelling all ignorance, the ignorance that masks one's true nature, not as the body, but as the unchanging, infinite, immanent and transcendent reality. With this awakening comes compassion and the awareness of the oneness of all things (higher knowledge). This brings ananda (joy or peace). Just as we celebrate the birth of our physical being, Diwali is the celebration of this Inner Light.
While the story behind Diwali and the manner of celebration varies from region to region (festive fireworks, worship, lights, sharing of sweets), the essence is the same – to rejoice in the Inner Light (Atman) or the underlying Reality of all things (Brahman).