This is a very simple festival in which local school children write or draw on large paper cups which are later put in various places around the city and local temples, arranged in beautiful patterns. It runs from 6.00pm until 9.00pm in the evening and it is impossible to see all of the displays. But  I recommend that you definitely see the display in front of Onomichi Station and also Saikokuji Temple. At Saikokuji Temple they had a classical guitarist this year and it was really amazing to hear his music in the dark in a temple whilst surrounded by flickering lights as far as the eye can see. Jodoji Temple is also very nice.

This is a slide show of the Light Festival in Onomichi, and the images are generally really good so you get a really good sense of the evening.