Elspode, it's something to do with bringing the family/village good fortune; bringing fertility to the land in the coming year, and therefore good crops etc. Maybe it has a pagan history to it, and got integrated into the Christian festival. I'm pretty sure some of our more common Xmas rituals are pagan leftovers too, although I can't remember which.
I also found
this lovely article from BoingBoing about related pooey Catalan Christmas traditions.