To clarify, the actual day of Day of the Dead is not October 31, but rather November 2, known in the Catholic world as All Souls Day; this is hardly a coincidence. Mesoamerican cultures had a longstanding tradition of festivities honoring dead family members -- celebrating their lives, not their deaths. The kin were remembered by the presence of their preserved skulls, and it just so neatly happened that the terminus of these celebrations (which were more than a month long and seemingly garish but actually rather cheerful) nearly coincided with All Souls Day.
Just as pagan celebrations in Rome were converted to Christian ones, so were Mesoamerican celebrations Catholicized in the Catholic colonization and conversion of the region.
This being said, like all things in Mexico, the Day of the Dead celebrations are very regional. Southern states, those areas occupied by Mayan, Aztec, Toltec, etc., cultures, still continue the tradition, those preserved skulls now replaced with decorated sugar skulls, of course. Northern Mexican states are really not as interested in these celebrations.
With the brief history lesson over, it's time to bake an offering for the departed, and to enjoy in their memory.