Obon is an annual Buddhist event for commemorating one’s ancestors. It is believed that each year during obon, the ancestors’ spirits return to this world in order to visit their relatives.
Traditionally, lanterns are hung in front of houses to guide the ancestors’ spirits, obon dances (bon odori) are performed, graves are visited and food offerings are made at house altars andtemples.
At the end of Obon, floating lanterns are put into rivers, lakes and seas in order to guide the spirits back into their world. The customs followed vary strongly from region to region.
Obon is observed from the 13th to the 15th day of the 7th month of the year, which is July according to the solar calendar. However, since the 7th month of the year roughly coincides with August rather than July according to the formerly used lunar calendar, Obon is still observed in mid August in many regions of Japan, while it is observed in mid July in other regions.
The Obon week in mid August is one of Japan’s three major holiday seasons, accompanied by intensive domestic and international travel activities and increased accommodation rates. In recent years, travel activitiy in mid August has become somewhat more spread out and less concentrated, but it is still considerable on certain days.
Source: Japan Guide http://www.japan-guide.com/e/e2286.html