What is worshipped
The worship is not of Holika's evil but of the fire that destroyed it, and of Prahlada and Narasimha whom it could not touch. The pyre is honoured as Agni, who purifies, and as the power that turns evil to ash. A pole for Prahlada is often pulled out of the fire before it burns down, as a sign that devotion survives.
A folk explanation says that Holika, at the moment of burning, repented, and that Prahlada asked that she be remembered every year; so she is worshipped as one who was redeemed. Another says that she was a protective mother goddess of the village, worshipped to keep away disease, long before the Prahlada story was attached to her.
The fire and the harvest
Holi falls at the time of the winter harvest. New ears of wheat and barley and green gram are roasted in the bonfire and eaten as prasad, as the first offering of the harvest to the fire, which carries offerings to the gods. Holika, in some explanations, is the old year, burned so that the new can begin.
Women wind raw cotton thread around the pyre for their husbands and children, as a circle of protection, and take a little of its ash home the next day as a tilak against harm.
The new grain
In the villages of North India the ears of new wheat and barley are tied together and roasted in the Holika fire, then shared among the family. These roasted grains are called holak, and some say the name Holi itself comes from them.