So the way I heard it was the original idea behind dressing up for Halloween a LONG time ago was you dress up to scare away the real monsters, or at least that's what they told the kids. Wikipedia confirms this was at least part of it, (Christian linked tradition to dressing as a ghost to avoid getting got by a ghost that had it out for you).

Nowadays it's just an excuse to wear a costume, dress however and as whoever you want. Wanna be the killer from a horror movie? Sure. Batman? Why not. Your Uncle Steve as an inside joke to your family and friends? Go for it. It's also an excuse for parents of small children to dress them up and take tons of pictures of little Timmy dressed up as Buzz Lightyear or whatever, and let me tell you as someone who wore a Buzz Lightyear costume as a kid, it's fun for about 5 minutes, then it gets hot and you get cranky FAST.