How should we observe Laylat al-Qadr and when is it?

Question: How should we observe Laylat al-Qadr? Is
it by praying, or by reading Qur’aan and the Prophet’s Seerah, listening
to lectures and lessons and by celebrating it in the mosque?.

Praise be to Allaah.
Firstly:
The Messenger of Allaah (peace and blessings of Allaah be upon him)
used to strive hard in worship during the last ten days of Ramadaan as
he never did at any other time, praying, reading Qur’aan and making
du’aa’. Al-Bukhaari and Muslim narrated from ‘Aa’ishah (may Allaah be
pleased with her) that when the last ten days of Ramadaan
came, the Prophet (peace and blessings of Allaah be upon him) would stay
up at night and would wake his family up, and would abstain from
marital relations. Ahmad and Muslim narrated that he used to used to strive hard in worship during the last ten days of Ramadaan as he never did at any other time.
Secondly:
The Prophet (peace and blessings of Allaah be upon him) enjoined
staying up and praying on Laylat al-Qadr out of faith and in the hope of
reward. It was narrated from Abu Hurayrah (may Allaah be pleased with
him) that the Prophet (peace and blessings of Allaah be upon him) said:
“Whoever stays up and prays on Laylat al-Qadr out of faith and in the hope of reward, his previous sins will be forgiven.” Agreed upon. This hadeeth indicates that it is prescribed to observe Laylat al-Qadr by spending the night in prayer.
Thirdly:
One of the best du’aa’s that may be recited on Laylat al-Qadr is that
which the Prophet (peace and blessings of Allaah be upon him) taught to
‘Aa’ishah (may Allaah be pleased with her). Al-Tirmidhi narrated, and
classed the report as saheeh, that ‘Aa’ishah said: “I said, ‘O Messenger of Allaah, if I know which night is Laylat al-Qadr, what should I say on that night?’ He said, ‘Say: Allaahumma innaka ‘afuwwun tuhibb al-‘afwa fa’affu ‘anni (O Allaah, You are forgiving and You love forgiveness, so forgive me).”
Fourthly:
With regard to specifying which night of Ramadaan is Laylat al-Qadr,
this needs specific evidence, but the odd-numbered nights during the
last ten nights are more likely than others, and the night of the
twenty-seventh is the most likely to be Laylat al-Qadr, because that is
mentioned in the ahaadeeth.
Fifthly:
With regard to innovations, they are not permissible during Ramadaan
or at other times. It was proven that the Messenger of Allaah (peace and
blessings of Allaah be upon him) said: “Whoever innovates anything in this matter of ours that is not part of it will have it rejected.” According to another report, “Whoever does any action that is not part of this matter of ours will have it rejected.”
We know of no basis for the celebrations that are held during some
nights of Ramadaan. The best of guidance is the guidance of Muhammad
(peace and blessings of Allaah be upon him) and the worst of matters are
those which are innovated (bid’ah).
And Allaah is the Source of strength. May Allaah send blessings and
peace upon our Prophet Muhammad and his family and companions.
Standing Committee for Academic Research and Issuing Fatwas , 10/413