Loi Krathong coincides with the Lanna (northern Thai) festival known as Yi Peng. Yi means "Two" and Peng means a "full moon day". So Yi Peng refers to the full moon day in the second month according to the Lanna lunar calendar (the twelfth month of the Thai lunar calendar).
The festival is meant as a time to make merit literally: 'floating lanterns - so called Khom Loi', are launched into the air. Khom Loi are made from a thin fabric, such as rice paper, stretched over a bamboo or wire frame, to which a candle or fuel cell is attached. When the fuel cell is lit, the resulting hot air is trapped inside the lantern and creates enough lift for the Khom Loi to float into the sky.
Northern Thai people believe in Phra That Ket Kaew (the yearly relics or dog years) that are enshrined in heaven, which is emit air fire lantern. The tradition of releasing the lantern is believed to let bad things out of life.