Maleficient, the marathon is on November 6 so that is indeed possibly one reason. However, I would think the Halloween Parade is that actual reason hotels are so expensive. It's HUGE and is a big draw for out of towners and residents alike. I think it's the largest of it's kind? Not sure. It is definitely a must-do if over the top costumes and mega partying is your style. The entire area of the lower West Side of Manhattan (Greenwich Village) is one giant party ala mardi gras.
If you were bringing kids, I wouldn't suggest it at all. Some of the costumes are pretty racy. Plus, there are drunk folks galore on the streets. But if it's just adults, you might have fun. Be warned, you really have to be pretty open minded as well. Given the nature of that neighborhood, it's pretty openly gay. Nevertheless, if that type of environment is not your bag, it's super easy to avoid.
Personally, we avoid it big time nowadays because we've been there, done that. If you want to PM me for info, feel free!