Pumpkin Carving was introduced in October, 2000's Hollow Victory update as a seasonal event and became available once again during 2001's patch, The Widening Gyre. Pumpkins can be found scattered on the ground, usually at the feet of a Scarecrow (a permanent spawn can be found near Larry the Bunny Master's hut). Scarecrows may also drop pumpkins as loot when killed.
 

Item		Value	Burden	Description
Pumpkin		10	70	A bright orange hefty round pumpkin, sturdy and thick shelled. This item is used in cooking.
Great Pumpkin		30	210	A huge bright orange, hefty round pumpkin, sturdy and thick-shelled. This pumpkin looks too large to cook.

Use either a Whittling Knife or a Carving Knife to make a Jack O' Lantern. Anybody can make a reasonably carved Jack O'Lantern. To make a Superior Jack O'Lantern -- which doubles as a flaming thrown weapon! -- use the knife a 2nd time on the Jack O'Lantern. To be successful, you must be trained in the trade skill of the tool (if you fail, you will get a mangled pumpkin in return).

Jack O'Lanterns
Carving Tool
Type	Mangled Pumpkin	Jack O' Lantern	Superior JackO'Lantern	Great Jack O' Lantern	Great Superior JackO'Lantern
Craftsmanship	A sad attempt to make something of a pumpkin.	reasonably carved	finely carved	reasonably carved	finely carved
Value	1	40	50	40	50
Burden	40	40	40	60	60
Damage	1.5-2  Bl	6-8 Bl	11-14 Bl	6-8 Bl	10.5-14 Bl
Speed	(10)	(10)	(10)	(10)	(10)
Range	R: 50	R: 50	R: 50	R: 50	R: 50

During the Festivus event, animated Scarecrows returned, and this time they were accompanied by a new treat: Great Pumpkins! Like regular pumpkins, Great Pumkins can also be carved into Jack O'Lanterns using a carving knife. Very BIG Jack O'Lanterns! ;-) Like the regular lanterns, Great Superior Jack O'Lanterns are made by carving your Great Jack O'Lantern a 2nd time. To find a Great Pumpkin, you must first locate one of the animated Scarecrows. Don't kill it; instead, pick up all the pumpkins spawning nearby. Eventually, Great Pumpkins will begin to spawn.