All Souls Day isn't as old as the Feast of All Saints but does date back more than 1000 years. The feast is celebrated to pray for the souls in Purgatory.
To understand this doctrine and practice of the Church, it is necessary to understand that sin has a double consequence. Grave sin deprives us of communion with God and therefore makes us incapable of eternal life, the privation of which is called the “eternal punishment” of sin. On the other hand every sin, even venial, entails an unhealthy attachment to creatures, which must be purified either here on earth, or after death in the state called Purgatory. This purification frees one from what is called the “temporal punishment” of sin. These two punishments must not be conceived of as a kind of vengeance inflicted by God from without, but as following from the very nature of sin. A conversion which proceeds from a fervent charity can attain the complete purification of the sinner in such a way that no punishment would remain.
In the communion of saints, “a perennial link of charity exists between the faithful who have already reached their heavenly home, those who are expiating their sins in purgatory and those who are still pilgrims on earth. between them there is, too, an abundant exchange of all good things.” In this wonderful exchange, the holiness of one profits others, well beyond the harm that the sin of one could cause others. Thus recourse to the communion of saints lets the contrite sinner be more promptly and efficaciously purified of the punishments for sin.
Origins of All Souls Day
In the early centuries of the Church the names of the faithful departed were recorded in two-leafed tablets called Diptychs. In the 6th century there are records that the Bendictine monks remembered all their dead on the Feast of Pentecost (Whitsunday). In the 900s there is record from the Abbot of Corvey in Germany of a long-standing tradition of praying for the dead on October 1st.
St. Odilo of Cluny ordered a commemoration of all the faithful departed to to be celebrated in his monasteries on November 2nd in the early 1000s. It then spread throughtout the Benedictine abbeys of Europe. He was supposedly prompted to make this declaration by a pilgrim who came to see him after having a vision of demons complaining about prayers for the dead getting them to Heaven faster.
The custom spread first to the French diocese of Liege in 1008 and later became a general feast of the Church.
In time the entire month of November was set aside to remember the Church Suffering with November 2nd (or 3rd if the 2nd is a Sunday) as the official Feast of All Souls.
Before Vatican II priests were required to wear black vestments for this feast. Since Vatican II violet and white vestments have also been permitted.
Requiem Masses are typically celebrated on this day.
For more resources on Purgatory and the Feast of All Souls, read the Four Last Things book.