“According to tales and legends, the beginning of the Chinese New Year started with a mythical beast called the Nian. Nian would eat villagers, especially children. One year, all the villagers decided to go hide from the beast. An old man appeared before the villagers went into hiding and said that he's going to stay the night, and decided to get revenge on the Nian. All the villagers thought he was insane. The old man put red papers up and set off firecrackers. The day after, the villagers came back to their town to see that nothing was destroyed. They assumed that the old man was a deity who came to save them. The villagers then understood that the Nian was afraid of the color red and loud noises. When the New Year was about to come, the villagers would wear red clothes, hang red lanterns, and red spring scrolls on windows and doors. People also used firecrackers to frighten away the Nian. From then on, Nian never came to the village again. The Nian was eventually captured by Hongjun Laozu, an ancient Taoist monk. After that, Nian retreated to a nearby mountain. The name of the mountain has long been lost over the years.” from “Chinese New Year”
Source: Wikipedia