Milad un Nabi marks the birthday of the Prophet Muhammad (pbuh).
Large numbers of Muslims do commemorate the birth anniversary of the Holy Prophet, which falls on 12 Rabi-ul-Awwal of the Islamic lunar calendar. This date is important to us because the birth of the Prophet Muhammad is regarded as a great blessing for the whole of humanity. The Prophet Muhammad is the chief of all the Prophets sent on earth and it is to him that the Holy Qur'an was revealed.
In the Holy Qur'an Allah Almighty gives a clear order to celebrate and rejoice the raising and coming of the Holy Prophet (saw). In Surah Yunus, (10:58) Allah Ta'ala states "Say: Because of the( fadl) Blessings of Allah and His (rahma) Mercy you should celebrate (with happiness and pleasure). That is better than what (wealth) they amass." In this particular ayah Allah Ta'ala is commanding that we should rejoice and celebrate His fadl and rahma as much as is possible. The question naturally to be asked is what exactly should we be rejoicing. What does Allah's fadl and rahma refer to? According to other verses in the Qur'an (tafseer bil Qur'an) and the explanations given by scholars through their tafseer works of this ayah, the fadl and rahma in this ayah is a direct reference to the Holy Prophet (saw). He was sent to this world and being raised for mankind is the greatest fadl and rahma of Almighty Allah, so we should all celebrate and rejoice this event.
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