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Vaman Jayanti and Onam
Important to this story, though, is that Prahlada the Asura was very good and righteous, and ruled honorably in his father's place. And Prahlada's son was an even better King than his father. And Prahlada's grandson, Mahabali, perfected the art of governance. It is said there was no criminality in the time of Mahabali, and every being was content with Mahabali's rule. This is interpreted two ways: first, in a literal sense: Mahabali perfectly upheld the Dharma. The second is sarcastic, suggesting the question of how there can be criminality in a state of lawlessness? The riddle is solved by understanding that law without mercy are unjust, that rules without exceptions are wrong: all laws and rules are, as the Buddha Gotama described them, "counterfeit Dharma." As Vishnu instructed as Krishna and the Buddha Gotama, the world needs criminal Dharma. It is senseless pride to believe that any rule or law can be perfected. A state where laws are fulfilled without mercy, and without exception, is as much a lawless state as any anarchy.
Mahabali sought to finish the war of the Asuras and Devas by conquering the Devas - and all the lokas, all the worlds. And he did. And then ruled them in his "perfect" governance. Law was upheld without exception, and there were soon no criminals. To recognize his triumph over criminality, and over every world, Mahabali announced a sacrifice in honor of Vishnu: he would give to anyone who asked him anything that they asked for. Vishnu saw this as a teachable moment about pride.
A dwarf, Vaman (for that is what "Vaman" means, "dwarf"), heard the announced sacrifice and, inspired by the profundity of the moment, manifested Vishnu. The dwarf was not only deformed by his condition, but also a cripple, having been horribly injured early in life, as punishment - representing the injury that Mahabali had done to the Dharma by his strict enforcement - much as a parent who injures their child in punishment has performed their instruction wrongly, and with catastrophic results.
The Dwarf brought himself by small steps to the throne of Mahabali, who, despite the instructions of Vishnu against sympathy (favoring instead compassion) felt sympathy for the Dwarf. Mahabali offered the Dwarf fine clothes and vehicles - these were declined. Mahabali offered the Dwarf gold and jewels - these were declined. All kinds of wealth Mahabali offered the Dwarf - livestock, food, comforts - all of which were declined. At last, Mahabali offers the Dwarf a measure of equality, some of Mahabali's Kingdom. This was a gift that the Dwarf could not refuse! The Dwarf gratefully accepted, but when Mahabali asked the Dwarf how much of the Kingdom the Dwarf wanted, the Dwarf said "not much. One must live within one's means. But a great King like you understands that! Perhaps you might give me all that might be contained within three of my small steps?" This the King agreed to. "Certainly I have conquered enough to share with you as much as you ask!" said Mahabali.
The Dwarf took one step forward, heart filled with Vishnu - and as he strode, suddenly he was healed, and grew in stature: growing to be the size of a giant, his step encompassed the entire world! The former Dwarf then took another step and grew in stature even more: this step encompassed every world! Where would he step next? Mahabali recognized the manifestation of Vishnu and said, "Vishnu, you have nowhere else to step, and I promised you three steps: in my pride, I thought I had enough to satisfy you. All that I have conquered is insufficient, all my righteousness is pretentious. You have humbled me. Stand upon my head, and claim all that is within my being? This last I do not reserve from you, and indeed it is all that I ever had to give." The offer was genuine, and kind, an act of supreme devotion. Vishnu, to fulfill the promise made generations ago, then stepped on Mahabali's head - but since Mahabali had destroyed his own pride, there was nothing to destroy.
Mahabali was liberated from his pride, and in his freedom was grateful to Vishnu. Vishnu was so proud of Mahabali - he had learned the lesson of humility himself! He had not needed to "break" or "destroy" Mahabali. All of Mahabali's subjects saw the moment of Mahabali's victory over pride, and were so proud of Mahabali, too! They desired him as their King forever and ever.
But Mahabali now did not want to rule, and claimed the right of renunciation, and renouncing all the worlds and his Kingdom, to devote himself wholly to Vishnu as a Sannyasi. Yet Vishnu persuaded Mahabali to return to the worlds once every year: he had a duty to his subjects, after all!
So Mahabali does return once every year, on Onam, and give gifts to anyone who desires anything, and gives true justice to those who require it - mercy where it is required, and strict enforcement where it is required. And, of course, to teach the value of humility.