The paper money is then placed within the un-closed circle in preparation for being burned. 

In the centre you will see written the following characters:

"先母 XX 收用" - roughtly translated: "for my mother, NAME"

I have purposefully hidden the name out of respect for my wife's grandmother. 

This is written so that the souls know which money is for them.

Note that in this case, bags of paper money have been used, this is not always the case. In fact, oftentimes people will use bundles of paper money and throw them on as the fire continues to burn. Traditionally these were made by hand, but now they can be store bought. 

See the smaller bundle burning toward the right of the last picture? That is being burned for any wondering souls who are considering stealing the money that's burning for their ancestors - a small offering to politely ask them to keep their mittens off!

As the paper money is lit a few words are spoken, but rarely out loud. You will see family members gathered around these fires, lips moving but no words coming out.

My mother-in-law told me she asks her relatives to look after themselves, to spend their money (rather than save it as they will always burn more for them), to help protect her daughter, me and her grandson, and to bring the family luck. 

Her eyes well-up everytime she performs this ritual, I can tell it means a great deal to her. And I know that she hopes we will do the same for her after she is gone - though she would never ask - and we will. Always. 

Paper money is burned during the Spring Festival (春节 chūn jié) - specifically on New Year's Eve (除夕 chú xì), Tomb Sweeping Day (清明节 qīng míng jié), Winter Solstice Festival (冬至 dōng zhì) and the Ghost Festival (中元节 zhōng yuán jié). Though you will also see people burning paper money when a relative has recently passed, and/or on the anniversary of their passing (especially within the first few years of them passing).

In this picture I hope you can make out a white circle drawn on the floor with an opening at the bottom. It is drawn with an opening so that the souls of the deceased have a ways to enter the circle to collect their money. 

纸钱 (zhǐqián) has many different translations, including but not limited to, paper money, joss money and hell money. In order to understand why Chinese people burn paper money, you need to understand what they believe happens to the soul in the afterlife. 

The Chinese believe in a place called Di Yu (地域 (dì yù), where all souls go before they are reincarnated. Your stay in Di Yu is not eternal, instead, you will remain in Di Yu for a period of time that the Ruler of Di Yu deems necessary in order for you to atone for your sins. Similarly, how comfortable your stay in Di Yu is will be also be determind by the ruler and his the 9 other Yama he presides over. And trust me when I say they have many inventive methods at their disposal to make you wish for a swift return to mortal realm! 

Read A Journey Through Di Yu - "Chinese Hell" to learn more about Di Yu

So, during your not-so-wonderful stay in Di Yu, you will need money and material goods to get around, bribe officials and demons, to make your stay as comfortable as possible. And that money, as well as material goods, are sent to you by your decendents on earth through the burning of paper money in your name. Below are a few pictures of my mother and father-in-law - who were kind enough to agree to being photographed - burning paper money for their ancestors at Chinese New Year: