Doesn't "in" require dative? [EDIT: Answering my own question] I just reached the Prepositions unit and discovered that "in" phrases (as well as those of some other prepositions) can either be dative or accusative. Motion towards (i.e., wohin? (where to?)) uses accusative, whereas location (i.e., wo? (where?)) uses dative. Sorry for the erroneous feedback, Duolingo! source: http://german.about.com/library/blcase_dat2.htm
The distinction between the dative and accusative use of 'in' and a couple of other German prepositions is sometimes oversimplified to say the accusative is used when there is (figurative or real) motion and the dative is used when there is no motion. This is not quite right. When there is motion within the confines of an area, the dative is also used. When one passes from one area INTO another, then the accusative is used. Therefore: Er geht in einem Kreis (=circle) herum. But: Er geht in einen Kreis hinein.
I'm not a native speaker of German, and this usage took me a bit by surprise too, but the reasoning seems clear. There is figurative motion between two areas or time frames, from ordinary time (in)to vacation. Though it's not an idiomatic transition like 'I'm going on vacation,' you could understand it as 'I'm entering vacation.' However, I wouldn't expect Duo to accept that.
I have the same question with you.
This is my guess: 'I'm going to the vacation.' and 'I'm on vacation.' are distinguished by the article.
Since 'in' is one of those 'prepositions governing two cases', according to the 'moving-accusative, place-dative' rule, here it means I'm heading to a vacation.
And what's more, I am on a vacation would be 'Ich gehe in den Ferien.'
Sorry I'm not giving any certain answer. It's just my speculation. Hope some native speaker or advanced learner could confirm or disprove it>.<
Both "Ferien" and "Urlaub" mean holiday/vacation, but "Ferien" is more used for school (e.g. Schulferien) and "Urlaub" is more used for workers (e.g. Arbeitsurlaub).