The story
Muḥammad was born at Mecca in about 570, in the Year of the Elephant. He was orphaned young, worked the caravan routes, married Khadīja, and at forty received the first revelation in a cave outside the city.
The day was not kept in the first centuries of Islam. It became a public festival under the Fāṭimids in Egypt and spread from there, and the great celebration at Erbil in the thirteenth century is the one the chroniclers describe.
Whether to keep it at all is an old and open argument. Much of the Sunni world and the Shīʿa world observe it; Salafi scholarship and Saudi Arabia hold that a festival the Prophet did not keep should not be added, and the day is not marked there. Stating that is more honest than presenting one side as the practice.
