Diwali is a festival that relieves traditions/beliefs/faith which originates in Hindu Mythology. My exposure to Hindu mythology started during my student days ..... and not much since, actually.
Anyways, some regions in India have "localised" the myths associated with Diwali with different myths. However, the significance of it all remains the same- Victory of Good over Evil, Light over Darkness.
The info with regard to Diwali and how it is celebrated in various parts of India, is available all over the net. What is culturally predominantly prevalent in Malaysia is as practiced in Southern India, particularly Tamil Nadu.
Here is something from Musings of an Unknown Indian:-
Celebrations across faith: In Hinduism, across many parts of India and Nepal, it is the homecoming of Lord Rama (along with his consort Sita and brother Lakshmana) to Ayodhya - after a 14-year exile in the forest and his victory over Ravana, the King of Lanka (who had abducted Sita and held her prisoner). According to the legend, the people of Ayodhya (the capital of his kingdom) welcomed Rama by lighting rows (avali) of (ghee) lamps (dĭpa), [thus its name: dīpāwali] - along the way to light their path in the darkness. Rama is considered as a symbol of good and a positive force while Ravan represents evil. Therefore, Diwali is considered as the festival, which establishes the 'victory of good over the evil'. More on this here.
On the night of Diwali, people light diyas, which is again a symbol of positive energy... in order to conquer darkness, i.e., the symbol of negative energy. Since Ram traveled from South India to his kingdom in North India, he passed through the south earlier. This is the reason why the festival is celebrated a day earlier in South India. Diwali usually comes 19 or 20 days after Dasara/Dussehra. In South India, it marks the victory of Krishna over Narakasura. Over time, this word transformed into "Diwali" in Hindi and "Dipawali" in Nepali, but still retained its original form in the South and East Indian Languages. In the Dravidian languages it is called as Deepavali and the same is used in Malaysia and Singapore.
In Jainism, Diwali marks the attainment of nirvana by Bhagavan Mahavira - the founder of Jainism - on 15 October, 527 BC.
Diwali has been significant in Sikhism since the illumination of the town of Amritsar commemorating the return of Guru Har Gobind Ji (1595-1644), the sixth Guru of Sikhism, who was imprisoned along with 52 other Hindu kings at Fort Gwalior by Emperor Jahangir. After freeing the other prisoners, he went to the Harmandir Sahib (Golden Temple) in the holy city of Amritsar, where he was welcomed happily by the people who lit candles and divas to greet the Guru. Because of this, Sikhs often refer to Diwali also as Bandi Chhorh Divas - "the day of release of detainees."
The festival is also celebrated by Buddhists in Nepal, a majority-Hindu country, particularly the Newar Buddhists.
For more click HERE