"occasion on which entertainment or profit is derived from injury or death of another," 1860, originally in reference to holidays for gladiatorial combat; the expression seems to be entirely traceable to an oft-quoted passage on a dying barbarian gladiator from the fourth canto (1818) of Byron's "Childe Harold's Pilgrimage":

But where his rude hut by the Danube lay

There were his young barbarians all at play,

There was their Dacian mother. He, their sire,

Butcher'd to make a Roman holiday!

late 14c., "freedom from obligations, leisure, release" (from some activity or occupation), from Old French vacacion "vacancy, vacant position" (14c.) and directly from Latin vacationem (nominative vacatio) "leisure, freedom, exemption, a being free from duty, immunity earned by service," noun of state from past-participle stem of vacare "be empty, free, or at leisure," from PIE *wak-, extended form of root *eue- "to leave, abandon, give out."

Meanings "state of being unoccupied," "process of vacating" in English are early 15c. Meaning "formal suspension of activity, time in which there is an intermission of usual employment" (in reference to schools, courts, etc.) is recorded from mid-15c. As the U.S. equivalent of what in Britain is called a holiday, it is attested from 1878.