It's reenacted with great dramatic, pious fervor, and is called Las Posadas (posadas means "inn" or "lodging place"), because it's based on the Christmas story as told and written by Saint Luke.
"In those days Caesar Agustus issued a decree that a census should be taken of the entire Roman world. (This was the first census that took place while Quirinius was governor of Syria.) And everyone went to town to register. So Joseph also went up from the town of Nazaeth in Galilee to Judea, to Bethlehem the town of David, because he belonged to the house and line of David. He went there to register with Mary, who was pledged to be married to him and was expecting his child. While they were there, the time came for the baby to be born, and she gave birth to her firstborn, a son. She wrapped him in cloths and placed him in a manger, because there was no room for them in the inn. (Luke 2:1-8)
*Since this is my photography blog—and my place for learning and practicing—I want to fully disclose that I am NOT happy with how I took these and the way they turned out. I know what I want to try for next time, but I was also very eager to share this special tradition with people who might have never heard of it before.