You might have also heard the terms "transvestite" and "cross-dresser." (It should be noted that cross-dresser rather than transvestite is the preferred term by the cross-dressing community.) Cross-dressing does not designate sexual orientation. A cross-dresser is simply someone who dresses in clothing of the opposite gender; doing so doesn't mean he or she identifies as that opposite gender.
People who cross-dress can be cisgender -- that is, their gender identity aligns with the gender they were born. Many heterosexual, cisgender males cross-dress.
People cross-dress for different reasons. Individuals who do it for entertainment and performance purposes are referred to as "drag queens" and "drag kings," when speaking of males and females, respectively.
Since I only have so much room, the last thing I want to discuss is being genderqueer (though there are more transgender identities than the three I've spoken of). Genderqueer is another umbrella term that deals with people whose gender identity falls outside the gender binary.
Think of the gender binary as a straight line, with one end being male/masculine and the other being female/feminine. Those outside the gender binary can identity as having two or more genders, having no gender, having a gender that fluctuates and more.
Remember that the terms "gender" and "sex" do not mean the same thing. The easiest way to describe this is by saying that sex refers to the genitals you were born with, while gender is the way you personally perceive yourself in (or outside of) the gender binary.
Lastly, it's important to note that being transgender does not designate a sexual orientation. People who are transgender can be heterosexual, bisexual, homosexual or of another sexual orientation like pansexual (being attracted to others regardless of their sex or gender identity) or asexual (having no/very low sexual attraction to any sex or gender).
Now that you have a basic grasp of the transgender community, I encourage you to participate in the holiday and help raise awareness of it. A single act of violence is one act too many, and many acts are the result of ignorance and hatred.
Educate yourself and others on transgender culture, and remember to always keep both your mind and heart open when it comes to accepting others -- even if you don't fully understand them.