I have found many sites explaining in great detail the celebration of Los Posada. Therefore, this is a cursory explanation.
Los Posada remembers the hardships the Mary and Joseph had on their way to Bethlehem. There is a procession every night from December 16 through December 24. In this procession, there is usually a small child representing Mary and a small Child representing Joseph. If possible, Mary is on a donkey and the rest of the people in the procession are dressed as the 3 magi, shepherds and shepherdesses. This process goes to several houses and knocks on the door. At the door there is sung exchange. The words can be found in the next post or at the following link: http://www.mexconnect.com/mex_/travel/dpalfrey/dpposadawords.html
In summary, Mary and Joseph are asking for lodging and are turned away. Some references say that they are turned away from 2 houses each night and the third house will let them enter.
The house which they enter always has a crèche or a nativity scene. After some prayers in the area of the crèche a party takes place. A star piñata is often used during this party to represent the star that led the wise men to the Christ child.
Don’t forget that you may always get great Mexican-made piñatas at Piñata Supply Co!
Next topic: Los Posada Procession Song