On Phalguna-pournami (the day of Holi), it is said that God Shiva burnt this Manmadha into ashes with his third eye when the desire started distracting Him. Shiva did not want to be deviated from his focus, and thus he destroyed the distracting force, Manmadha. On the request of Parvati, Manmadha was brought back alive, but in a body-less form.
Thus, Holi is celebrated symbolising desires with beautiful colours, and the pleasure filled state of manas by dancing around and having fun with friends and family. But, when these desires begin distracting you from your goal, you must also open your third eye.