In the New Testament, the word “saints” is used to describe the entire membership of the Christian community, and in the Collect for All Saints’ Day the word “elect” is used in a similar sense. From very early times, however, the word “saint” came to be applied primarily to persons of heroic sanctity, whose deeds were recalled with gratitude by later generations.
Beginning in the tenth century, it became customary to set aside another day — as a sort of extension of All Saints — on which the Church remembered that vast body of the faithful who, though no less members of the company of the redeemed, are unknown in the wider fellowship of the Church. It was also a day for particular remembrance of family members and friends.
Though the observance of the day was abolished at the Reformation because of abuses connected with Masses for the dead, a renewed understanding of its meaning has led to a widespread acceptance of this commemoration among Anglicans, and to its inclusion as an optional observance in the calendar of the Episcopal Church.
I never could quite figure All Souls' Day out, for the very reason that LFF states. I do think it's very cool to have a day of memory for those who died in the past year in the parish, for example. And I miss my relatives who have died, too. It's a good way to remember where we've come from and where we will one day go.
O God, the Maker and Redeemer of all believers: Grant to the faithful departed the unsearchable benefits of the passion of your Son; that on the day of his appearing they may be manifested as your children; through Jesus Christ our Lord, who lives and reigns with you and the Holy Spirit, one God, now and for ever. Amen.