According to legend...
In the 19th and early 20th centuries, railroads employed "hookermen" who used hooks to grab lanterns, mail, and other such items from poles along the side of the railroad tracks*. One night, somewhere along the rails in Morris County, New Jersey, the hookerman was thrown off balance and fell off of the train. He was knocked unconscious, and his arm was severed when the train ran over it. Some say that he died then and there of blood loss, others that he survived but had a hook put in place of his missing limb. Either way, the accident and the loss of his arm linked him permanently to that stretch of track.
Since then, people walking the railroad tracks at night have reported strange balls of light that appear above the track, and move along the track, changing color as they go. These lights are said to the the ghostly lantern of the unfortunate hookerman, looking for his lost arm.
Sometimes witnesses claim to approach the light only to see it move away from them, as if controlled by an intelligence. Even the removal of the tracks in the late 70's didn't result in the end of the lights. To this day, if one wanders the old route of the railroad through Morris County, there is a chance that you'll see the hookerman's spectral lantern.
* I have no idea if this is true. I have tried doing internet searches to find out, but my web-fu is weak...no doubt there's a sixteen year-old reading this who got an answer in a matter of minutes.
Commentary: This is a classic urban legend, variations of which can be found all over North America, but one of the best known versions is from Morris County, New Jersey. There are a few variations on the story even within Morris County, with some claiming that the hookerman was on the train, others that he was a railroad employee walking the line who was struck by the train. Some versions have him living through the incident, but having an arm replaced with a hook, while others hold that he had used a hook on a pole as part of his job and was killed by the train.
So, there's a few different things to talk about here. First off there's the fantastic urban legend nature of the story itself. Unlike most non-urban legend accounts of hauntings, the hookerman is given a goal: to find his arm. This is classic Urban Legend stuff, the ghost has a goal and is restless because that goal can never be reached. Then there is the fact that the legend has some very wide and strange variations - did the hookerman live or die? Is the hookerman called that because he worked with a hook or because his arm was replaced with one? - that is also class ic urban legends stuff. And, of course, there is a place given where one can go and see the ghost, which leads invairably to legend-tripping. This is a great story for these reasons alone.
But then you get the fact that, ghost story aside, there is a class of reported phenomonon known as "ghost lights", "spirit lights", "will-o-the wisps", or "spooklights" into which this can plainly be put. These spirit lights are widespread and include the Marfa Lights in Texas, and the Brown Mountain Lights of North Carolina, and the Min Min Lights of Australia. The causes of the lights are variable. The classic Will-o-the wisp appears in swamplands or marshes, and is likely due to nothing more than combustible gasses in the swamps. The other lights may be similar natural features, or may also be lights from mundane sources (automobiles, campfires, etc.) that are rendered unidentifiable due to atmospheric oddities (such as the movement of differentially heated air as the ground cools at night) or have simply been mis-identified by witnesses due to unfamiliarity with the landscape. Many people claim that these lights are caused by the Piezoelectric effect - wherein minerals such as quartz release electricity when struck.
I think that invoking the piezoelectric effect is overkill, as there are many other potential light sources available where most of the spooklights are reported, and they tend to be dismissed with little scrutiny by most paranormal researchers. However, it is interesting that even within the paranormal believer community, one is far more likely to hear a naturalistic explanation - even if it is a far-fetched naturalistic explanation - for these types of lights than to hear a supernatural one. What that means, if anything, I haven't a clue. But I find it interesting.
One other thing worth mentioning: most famous hauntings have completely subjective experiences - someone sees an apparition or hears a sound when nobody else is around, someone gets a "feeling of being watched", or someone notices that they are getting cold for no reason. These things are damn near impossible ot verify or test. What's cool about the spooklight phenomenon is that they are a visible, observable, testable phenomenon (which is perhaps why even many paranormal enthusiasts prefer naturalistic explanations), which means that A( if they are real, they can be shown to be real (at least hypothetically), and B) if they are found to be real, they can be studied.
And that is really damn cool.
Special Stuff: I loves me some Hometown Tales videos:
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Sources: Urban Legend, Local Folklore, Hometown Tales Podcast, Weird N. J., Horrorfind Weekend, Associated Content, Internet, Internet Forum, Another Internet Forum