Prayers? The smoke carries them to heaven.
I believe that I heard about this long ago as it is ringing a bell. I believe that this is something like "spirit money". It's burned and floats to the spirit world where it is received by their recently deceased so that they can live a comfortable afterlife.
It was that or it's burned to bring good luck and fortune. I'm not sure why I have to stories stuck in my head for this one.
I just had a class on this so, here we go. It is more of a Daoist practice than a Buddhist practice here in Taiwain, or should I say popular religion because it doesn't really fit anywhere nicely? At any rate, the paper money with gold is burnt as offerings to the gods. It is expected that if a person burns money to the gods, the gods will give them real money back. However, there is also paper money with silver on it. This is burnt for what they call hungry ghosts, or gui. The gui run around and mess things up sometimes, like lost souls or so forth. People burn the silver money to appease the hungry ghosts so they will not start messing things up in their life, or house or shops. In order for the money to get to heaven or out of our physical world it must be burn, and kind of the vapors are what the gods or ghosts can feed on, or spend.
Yes, a priest will write a prayer and burn it so that it may be known.