As legend goes, in ancient times there was a monster called nián 年. Every Spring, during New Years Eve, nián would come out to eat villagers, destroy their homes and farms.
One year, the villagers were burning bamboo to keep themselves warm. nián approached a village and was frightened by the cracking noise of the burning bamboo. The villagers then discovered a way to drive away nián and keep themselves safe. As time passed and technology advanced, firecrackers were invented and replaced the burning of bamboo.
Today, lighting firecrackers is a major custom performed to scare off evil spirits and celebrate the coming of the New Year. Interestingly, nián, the name of the monster is also the word for year in Chinese.
Here is some other useful vocabulary:
新年 xīn nián (new year)
去年 qù nián (last year)
今年 jīn nián (this year)
明年 míng nián (next year)