Hiranyakashypu was the king of the asuras (demons). His brother had been slain by Vishnu for terrorizing gods and goddesses. So, he wanted to destroy Vishnu and keep other Gods in heaven subdued. He told his soldiers to crush all those who worship Vishnu. But the Gods protected the Devotees of Vishnu.
Hiranyakashypu thought to himself "I will have to match my powers to Vishnu's to rule over the three worlds". So, he began to perform severe penances and tapasya. While he was so occupied, the Gods ransacked his city and destroyed his palace. His Queen was expecting a child then. She was sent by the gods to Sage Narada's hermitage. She lived in the Ashram of the great sage and learned about religion and the glory of Vishnu from him. The child within her, Prahlad, too, absorbed all this knowledge.
Meanwhile, Hiranyakashypu's austerities pleased Brahma and said: "Arise Hiranyakashypu. Any boon that you ask of me shall be yours". Hiranyakashypu said, "I wish that my death be not caused by man or beast, with a weapon or without a weapon, during day or night, indoors or outdoors, on earth or in the sky. Grant me the undisputed lordship over the material world."
Hiranyakashypu brought his wife back to his city where Prahlad was born. He, with his new powers renewed his hostilities against Vishnu and Vishnu's followers. He declared, "There is no one stronger than me. I am the lord of the three worlds. I shall be worshipped as such".
Prahlad in the meanwhile was growing up and was Hiranyakashypu's delight. He asked Prahlad: "Son, tell me what do you think is the best thing in life"? Prahlad replied: "To renounce the world and seek refuge in Vishnu". Hiranyakashypu laughed. Then he called his Son's teacher to him, saying: "Guard him closely. I think that the followers of Vishnu are secretly influencing him. Don't let him out of your sight."
After many months, his teacher said: "Prahlad, I think you are now ready to meet your father." His father asked him: "You have been with your Guru a long time! What have you learnt? Prahlad said: "I have leant that the most worthwhile occupation for anyone is the worship of Lord Vishnu". Hirnaykashypu was very angry: "O cursed child! Who taught you such perverse things?" Prahlad remained calm and said: "Vishnu. He reveals himself to all who are devoted to him." Hiranyakashypu shouted angrily: "This boy must not live! Take him away and kill him! Kill this vilest enemy disguised as my son. Poison him or attack him when he sleeps but kill him!"
Hiranyakashypu roared: "Where is Vishnu? If he is everywhere, why is he not here to protect you? If he is not there then I shall cut off your head with my sword. Let Vishnu, your Lord protect you."
As Hiranyakashypu was striking the pillar with his sword, Lord Vishnu, in the form of Nara-simha (nara=man,simha=lion) emerged from the Pillar. His look was neither that of beast nor man. Nara-simha caught Hiranyakashypu and it was the twilight hour, carried him to the threshold of the court- room which was neither indoors nor outdoors and while holding him on his lap, killed him. Prahlad was installed on the throne and he ruled wisely and well for many years.
The religious significance of the festival of Holi is to mark the burning of self-conceit, selfishness, greed, lust, hatred, in fact all the undesirable demoniac tendencies, propensities, thoughts and behaviors. The victory of righteous forces over demoniacal forces!!!