Purim is a festive day of merry-making when it’s common to dress in costume in order to add to the carnival-esque atmosphere of the holiday which also includes feasting and drinking. The practice traces back centuries, possibly to medieval Italy and the fact that Purim tends to coincide with Mardi Gras on the calendar.
Masquerading also ties into the theme of hidden identity that runs through the Purim story. The Book of Esther is one of only two books in the Hebrew Bible which does not mention God’s name, and God plays no overt role in saving of the Jews of ancient Purim, the miracle which Purim celebrates. Therefore, there is a notion that in the Purim story God is hidden. Similarly, the Persian name Esther sounds like the Hebrew word for “hidden.” And, indeed, Esther hid her Jewish identity from King Ahasuerus until she needed to reveal it to save her people.
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