Yes, 'Fire in the Sky' is based on a true story. It's about the Travis Walton abduction incident. Walton claimed to have been abducted by a UFO. The movie dramatizes his experience, from the alleged abduction to his return. It tries to show what might have happened during those strange days.
The movie Fire in the Sky does have roots in real-life incidents. However, some elements might have been dramatized or fictionalized for cinematic effect.
Well, 'Fire in the Sky Based on a True Story' is probably centered around an incident that actually occurred in the sky. It could be about a meteorite shower that was more intense or had some unique characteristics. Or it might be related to a strange light or fire - like appearance in the sky that left the witnesses baffled and whose story was then told in this work.