For Diwali (which is kind of a combination of Christmas, New Year's, Easter and the Fourth of July, it seems, from an American point of view), people use oil lamps of all sorts, but there are these little clay lamps for sale in stores and on the roadside:
The fancy molded ones in the lower left box are just everywhere this week. And the round ones in the upper right box are plain versions.
Today there's a gathering of homeschoolers to paint some of those. They're low-fired pottery, so that they can be recycled later. People use new ones each year I think. I'll have photos of the painting session on my India blog in a few days. Tomorrow we fly to Bangalore for Diwali, which is day after tomorrow.
"Diya" and "Diwali" are related words. Light. The sound for "y" and "w" is the same here, it seems, kind of a combination of W and v.
Here's a link to a google image search on "clay diya."