Urabon'e (usually called Obon or just Bon in Japanese) is a Japanese Buddhist custom to honor the deceased spirits of one's ancestors. "Urabon" ("e" means an assembly) originally came from the sanskrit word "Ullambana", which means "hanging upside down". This is a metaphor of great suffering.
In Sotoshu tradition, the most important element of this custom is a ceremony called Sejiki-e (Food-Offering Assembly). This is performed to make offerings not only to one's own ancestors but also to the Three Treasure, and all the departed sentient beings, particularly beings in the Realm of Hungry Ghosts.
The origin of this ceremony is a story of Maha Maudgalyayana (Mokuren), one of ten great disciples of the Buddha. It is described in the Ullambana Sutra. This is the outline of the story;
One day during a summer retreat he used his supernatural powers to look for his deceased mother. To his astonishment he discovered that she had fallen into the Realm of Hungry Ghosts and was enduring great afflictions. She was experiencing extreme thirst and hunger. Her son, Maudgalyayana, offered her water and food to alleviate her suffering but they all turned into a fire right before she took them. He was helpless. Greatly distressed, he went to the Buddha and asked how he could release his mother from this misery. Buddha said to him, "Make offerings to the all Buddhist monks who attend this retreat, on the final day of the 90-day summer retreat (the 15th day of the seventh month). Then your mother will be able to receive a part of those offerings". So Maudgalyayana did what the Buddha instructed and his mother was able to eat and drink and be released from the pain of being in the Realm of the Hungry Ghosts.
What can we learn from this story? I would like to point out two things. First, in this story the Buddha instructed Maudgalyayana to make offerings to the sangha in this living world, instead of to his own mother. According to the story, his mother fell into the Realm of Hungry Ghost because her love for her son had blinded her to the need of others; she was very greedy and selfish to everyone except to her son. So her son had to practice generosity for her. When he felt a great and deep joy of doing this, his mother within him could also feel the same joy and be saved. In this way Maudgalyayana experientially learned about the karmic result of self-centered greed and the power of unselfish offerings. In that sense his mother was a great teacher for him. He must have greatly appreciated his mother for this important lesson. If we use "supernatural power" of looking deeply, we can be guided by even deceased people living in our hearts.
Secondly, his mother was saved not by her son alone nor by the Buddha but by the practice-power of the sangha. In Bon Festival Food-Offering Assembly Statement, this point is clearly expressed.
The mountains of delusion are profound in gloom; the light of the sun and moon fail to illuminate them.
The ocean of suffering has towering waves; the power of sageliness fails to transport one across it.
The ladder of wisdom seems to be of no use; the boat of compassion appears to have lost its capacity.
As for Brahma and Indra, they can do nothing about it.
As for all the Buddhas, even if they flocked to the scene, their hands would be tied.
The Tathagata devised an expedient means in which he resorted to the mighty spiritual power of the assembly of monks.
Maudgalyâyana saved his own beloved mother from the most severe hunger and starvation.
One should respect the mighty spiritual power of those who have practiced together during the retreat which greatly exceeds the great power of wisdom of all the Buddhas of the three times.
Do not doubt that the aggregate of merit of the harmonious assembly of monks instantly destroys the aggregate of ignorance of living beings who experience suffering.
As mentioned above, whether we are ordained as monks or not, we should highly value and have faith in the "mighty spiritual power" of the Buddhist sangha. Let us do our best to bring out that power in order to help out all sentient beings that are in anguish.