However, it's really not about independence. Not at all. It's a public holiday that marks the day Hong Kong was turned over to formal People's Republic of China sovereignty in 1997.
From what I gather, there's generally a big fireworks show over Victoria Harbour in the evening. According to people in the elevator this morning, the day is also marked, typically, by a giant protest march:
On 1 July of each year since the 1997 handover, a march is led by the Civil Human Rights Front. It has become the annual platform for demanding universal suffrage, calling for observance and preservation civil liberties such as free speech, venting dissatisfaction with the Hong Kong Government or the Chief Executive, rallying against actions of the Pro-Beijing camp.
The march saw a turnout of 500,000 in 2003 when the populace rose up against a questionable amendment to the Hong Kong Basic Law that many saw as ceding to much to the PRC government in Beijing. I have noticed that people take the right to protest seriously here - with authorities going to almost ridiculous lengths to accomodate a few ladies downtown who camp outside of the Citibank location with signs like "Citibank Bloodsucker" and an incredibly annoying taped chant in Cantonese. The proximity to "the mainland" certainly provides a stark contrast that makes the actual exercise of certain liberties all the more dear, it seems.
Ironically, tomorrow's annual push for freedom also falls on the same day the oppressive new smoking ban hits Hong Kong bars.