Long ago, Kerala was ruled by the Demon King, Mahabali. Mahabali was a efficient and popular ruler. He was loved by all. His kingdom stretched the earth, the Patalam or Underground and was threatening the skies. The ruler of the Heaven, Lord Indra got apprehensive of Mahabali's Popularity and might, and approached Lord Vishnu for help and advice. Vishnu came to this mortal world as a (Vamana) Brahmin (this is one of the Avatar of Lord Vishnu) and went to Mahabali and asked for 3 steps of land. Mahabali readily agreed. With the first step, Vamana span the entire Earth, with the next the underground or patalam, and there was no where he could put his third step, Mahabali being true to his word, asked Vamana to keep the third foot on his head, and hence Mahabali was pushed down into Patalam. Mahabali requested Vamana to grant him a boon where by he can come and visit his homeland, Kerala at least once a year, and as legend goes, he comes to visit his people and his land during Onam.
Even now, people sing the a song which goes like this, Mahabali Naadu Vazhirunua Kallam, Manusharalam onnu polle (When Mahabali was the ruler of the land, all people were equal).
The most important things about Onam are the Onna Kodi, the new dress that you wear on this day and Ona Sadhya, a feast which is quite elaborate. During Onam, people decorate the front of their home with Pookalam, a drawing made out of flowers. Young kids go round the neighborhood collecting what ever flowers they can get, and sit together and 'paint' the pookalam.