The Figure
Holika is the sister of the demon king Hiranyakashipu and the aunt of Prahlad. She holds a boon — variously given as a shawl or a cloak, or simply as an inherent immunity — that prevents fire from harming her. When her brother's attempts on his son's life have all failed, she offers to end the matter: she will sit in a fire with the boy in her lap, and he will burn while she does not.
The Reversal
It goes the other way. Accounts differ on the mechanism — in the most commonly told version the protecting cloak leaves her and settles over Prahlad, in others the boon is simply void because it was granted on condition that she never use it to harm — but the outcome is constant. Holika is consumed; Prahlad stands up out of the ashes unhurt. The bonfire lit on the eve of Holi is her burning, and the festival takes its name from it.
Reading Her
Holika is not a straightforward villain in every telling, and the variation in the accounts of her boon is doing real work: several versions make her destruction turn on the condition attached to her protection, which means she is undone by the terms of her own gift rather than by superior force. That is the same shape as her brother's end. The story is interested throughout in protections that fail precisely because of how they were sought.
In Practice
For most people at a Holi bonfire the theology is not foregrounded — the fire is a neighbourhood gathering with offerings made into it and children running around it. But the name is doing the explaining: Holi is Holika's fire, and the colour thrown the next morning follows from a burning, not the other way around.
Characters
Part of Holi (Fagu Purnima)