What is diawali?

First of all, it's spelled Diwali. Diwali is short for the Word Dipavali. Diwali is celebrated because Krishna, the Hindu God, went in the form of Rama, pronounced Ram. Ram had to go on a 14 year exile because his step mother, Kayki, wanted him to go and because if Ram didn't go, her son, Bharat, wouldn't have been king after the death of the current king. In short, Diwali is celebrated for the return of Ram.