Like many other ancient holidays, Christmas observance is a conglomeration of several other festivals. To early Christians, it commemorates the birth of the Christ Child. However, in scripture (The Gospel of Luke 2), there is no mention of a date but rather events that indicate his birth was most likely in another season. Among scholars, it is readily accepted that December 25 was not the birthday of Christ.
The Romans celebrated the Birthday of the Unconquerable Son (Natalis Solis Invicti) just after the winter solstice. This feast was in honor of Mithras, a Persian deity of the Sun. Furthermore the Romans had long celebrated the ancient feast of Saturnalia, a period of gaiety and jubilation. The Christians didn't want to participate in pagan practice and rejected Mithriasm. The Romans, in part to bring together the two factions, a compromise celebration was created on December 25.
In parts of western Europe, many celebrated a winter feast during which they decorated their houses with greenry and candles, exchanged gifts, and had large feasts. As Romans conquered other parts of Europe and propagated Christianity, they assimilated other local holiday practices into the Christmas celebration.
Today the practices associated with Christmas are likewise a conglomeration of different traditions from many different origins. Santa Claus, Carols, St. Nicholas, Yule Logs, Candles, Holly, Reindeer, Colored Lights, Christmas Cards, Christmas Trees, etc. all have different roots which are now blended into a single new tradition. Elements from just about every culture are represented in some way which is perhaps a reason for the holiday's popularity today.
In 1836, Alabama officially recognized Christmas as a holiday. By 1890, all other states had done likewise.