It has become a wide spread custom to dress up in costume on Purim. One reason is because of the hidden nature of G-d in the story of Purim. The Megillah is the only book in all of Jewish scriptures where G-d's name is not mentioned. So Purim represents the idea of G-d "hiding" Himself in this world, and performing hidden miracles, as opposed to revealed miracles (think Passover and the plagues) on behalf of the Jewish people. We represent G-d hiding Himself, by also hiding ourselves in costume. Clothing is also mentioned many times in the Purim story, with Achashverosh dressing up at his party, to Mordechai wearing sackcloth and ashes, then Haman dressing up Mordechai in fine clothing before he parades him through the streets of Shushan, and Esther dressing in her finery before she walks into see Achashverosh.
As you can see, Purim is a very deep and important holiday for the Jewish people, and is on no way a "Jewish Halloween"! On the contrary, the deeper Jewish sources say that if you break down the words Yom Kippur you get, "Yom, K, Pur" which means " a day like Purim", but only "like" Purim, but not as good. We can connect to G-d through fasting, but can reach much higher levels though physical enjoyment!