Strictly translated, a menorah is actually just any sort of candelabra. The one with 9 candles, one set apart from the others is a Hanukah. However, common usage is that the menorah is a candelabra with 8 candles in a row(more or less) and one candle set apart. The candle set apart is called a shamash, and it is used to light all the other candles. The tradition is that you light one candle(not including the shamash) on the first night of Hanukah, two candles on the second night, and so on up to the third night. You light the candles from right to left with the shamash, and say this Hebrew prayer:

Baruch Atah Adonai, Eloheinu Melech Ha'olam, asher kidishanu b'mitzotav, vitzeanu l'hadlich ne'er shel Hanukah.

Which roughly translates to "Blessed are you, Lord our God, Ruler of the Universe, who hallows us with mitzvot, and commands us to light the Hanukah lights." Mitzvot is a hard word to translate, but it roughly means good deeds and commandments. Ask your local rabbi for a better, more detailed explanation.

The point of the menorah is to celebrate the miracle of Hanukah, where God kept the light burning for 8 days in the temple even though there was only oil for one.
The Menorah in the Beit HaMikdash (the Holy Temple)
Midrash Rabbah on parshath B'Haalotcha ("In your going up [to light the candles of the Menorah]") asks the following question:
In Tehillim (Psalms) it says: "Darkness is like Light to you [God]." God has no need of the light of the Menorah which was lit in the Beit HaMikdash, so why do we light it for him?
In answer, as is often the case in Midrash, a parable is offered:
There was a blind man and a sighted man who were walking together along the road. The sighted man was leading the blind man. When they got to the house, it was dark inside. The sighted man asked the blind man if he would go in and bring out a candle and light it so the sighted man would be able to see in the house.
Now, if the blind man could find his way through the house, so could the sighted man, the Midrash explains, it isn't that the sighted man needed to wait outside for the candle. Instead, he asked the blind man to help him so the blind man would feel less indebted to the sighted man for guiding him along the road.
It was a pure act of kindness.

This has much greater implications and hints than simply explaining why the Menorah was lit in the Beit HaMikdash. The great Hassidic Rebbes explained that this world was given to us in order to make us appreciate the coming world. Not in the simple sense (This world is difficult and you must work, and in the next world no work is required and we appreciate the rest.) but rather in a much greater sense. They explain that God wanted to give us the next world, but without the ability to feel like we earned our place there, we could never truly enjoy it. We would feel unworthy, indebted, and ultimately shamed at our own lowly stature. Instead, God gives us first this world in which he asks us to "work", and only afterwards he gives us the world to come as a "reward".1

In this way, God's kindness is even greater in the giving of this world. Not only does he want to give us peace and happiness, but he doesn't want us to feel like he gave it to us. He doesn't want gratitude, only our unhindered appreciation of his gift.

This is the essence of the Menorah. Recognising the deeper kindness God does in giving us the darkness to begin with, we fulfill his wishes and bring light into the world as if it were we who brought the light. The reality is emphasized in the design of the Holy Temple, the House of God. The windows, the Midrash says, were the opposite of normal windows, rather than being designed to let light in, they were designed (by Shlomo HaMelech) to let light out. This shows our recognition that it is ultimately from God that everything emanates like light.

1. In this context the quotation marks are meant sarcastically or ironically, because in Judaism we believe that the "work" God asks of us is a kindness in that it is only through this work that a person feels fulfillment and true happiness. (especially in this world)
Some additional notes on menorot -- both the original and the special Hanukah version:

The "original" menora -- that used daily in the Temple -- had seven branches, as demanded by Exodus 25:31-40. The seventh was the shamash, or servant, light, as noted above. After the destruction of the Temples, it became tradition to build the menorot with any number of branches other than seven, so as to remember the tragedy and avoid blasphemy. In our modern times, many see this injunction fulfilled by use of electricity rather than oil, and thus seven-branched menorot can be seen gracing many a synagogue.

The Hanukah menora, or hanukiya, has nine branches -- the seven of the original, plus one for the miracle of the holiday, plus another for the shamash. In addition to the continuation of the Temple tradition, this last light is employed because the Hanukah lights are prohibited from common use; using a ninth light to light the other eight is supposed to discourage use of those eight for practical tasks.

On the first night of Hanukah, in addition to the prayer above, two more Hebrew blessings (brachot) are said, or more usually sung:

"Baruch ata Adonai, eloheinu melech haolam, sheasa nisim lavoteinu bayomim hahem bazman haze." Which translates (loosely): "Blessed are you Lord our God, King of the Universe, who performed miracles for our ancestors in those days in this season"; and

The Shehecheyanu: "Baruch ata Adonai, eloheinu melech haolam, shehecheyanu, vkiyimanu, vhigiyanu, lazman haze". Which translates (again loosely): "Blessed are you Lord our God, King of the Universe, who has preserved us, nurtured us, and carried us to this season."

The former is said every night of Hanukah. The latter is said on the first night only; this prayer is not unique to Hanukah, for it is generally said upon the first occurrence of an event in the Jewish year.

The candles are placed in the menora right to left and lit left to right so as not to play favorites with directions or sides. One more is lit each night because the joy of Hanukah should increase, not decrease, as the holiday proceeds -- this according to Hillel.

The lights of the hanukiya are supposed to be placed somewhere visible to the outside world, unless doing so presents a danger to the lighter(s) -- thus to share the miracle with everyone.

Sources for this writeup included the Artscroll Siddur, Joseph Telushkin's Jewish Literacy, Alfred J. Kolatch's Jewish Book of Why, and 27 years of firsthand Judaism. Apologies for poor Hebrew transliteration and translation.

Submitted for due consideration in The Ninjagirls Christmas Special 2003.

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