We have had a number of theories over the years, including refradtion of distant stars to appear below the horizon, by layers of unstable air comprising a temperature inversion.
That theory does not explain the sightings reported in bad weather conditions (if those reports are to be believed).
Our current theory is that the small percentage of the reports that are not easily explained as manmade or natural lights is due to ball lightning, a phenomenon reported for centuries but still not understood. This is a glowing glob of gas of sports-ball size that appears and persists, perhaps moving or not, for several to tens of seconds before dissipating. How nature makes such an unconfined volume of glowing gas that does not instantly dissipate is not known. Attempts to make it in the lab have been modest at best (that is, attempts in free air, not confined in a bottle, which is easy to do). If nature has a way to do it in the Linville Gorge area, we intend to discover the physics and whatever triggers it to form.