One of two explicitly political songs on the album (the other being fellow single "American Idiot"), "Holiday" took two months to finish writing, as Armstrong continually felt his lyrics were not good enough. Aided by the encouragement of Cavallo, he completed the song. "Holiday" was inspired by the music of Bob Dylan. Armstrong wanted to write something stronger than "American Idiot", with harsh language to illustrate his points. The song takes aim at American conservatism. Armstrong felt that Republican politicians were "strategic" in alienating one group of people—for example, the gay community—in order to buy the votes of another. He later characterized the song as an outspoken "fuck you" to Bush. Armstrong for the first time imagined how he would perform the songs he was writing, and envisioned an audience responding to his lyric "Can I get another Amen?" The song's bridge, which Armstrong hoped to be as "twisted as possible," was designed as a "politician's worst nightmare."
The chorus's refrain—"This is our lives on holiday"—was intended to reflect the average American’s ambivalence on the issues of the day. Armstrong characterized the song as "not anti-American, it’s anti-war."
The first half of the video takes place in a car (a 1968 Mercury Monterey convertible), where Billie Joe Armstrong, Mike Dirnt and Tré Cool are partying around the town. In the second half they are cavorting in a bar where each of the band members portrays several different characters. Billie Joe Armstrong plays the mentioned Representative of California, two fighting clients, a punk rocker and a nerd. Tré Cool plays a drunken priest, an arrested patron, and a female prostitute. Mike Dirnt plays the barman, another punk, and a policeman. There are also scenes featuring seemingly worn-down can-can dancers. At the end of the video, the car smokes to a halt in the field that "Boulevard of Broken Dreams" begins in. Like the video for "Boulevard of Broken Dreams", this video was directed by Samuel Bayer.
The song was first covered by the Irish pop punk band Scuba Dice in 2006 and charted at No. 8 on the Irish charts, No. 2 on the download chart that week, and went on to be 42nd best selling single of 2008 for an Irish artist.