Oh, the pleasures of the holidays! Above you see a depiction of the Icelandic Yule Cat:
The oldest written sources on the Yule Cat are from the Nineteenth Century. These refer to the fact that those who do not get a new item of clothing for Yule are destined to become offerings for the Yule Cat. It may sound strange that the deprived ones will also become the sacrifices, but this tradition is based on the fact that every effort was made to finish all work with the Autumn wool before Yule.
The reward for those who took part in the work was a new piece of clothing. Those who were lazy received nothing. Thus the Yule Cat was used as an incentive to get people to work harder.
Icelandic poet Jóhannes úr Kötlum wrote a poem about the Yule Cat. Here is one stanza, in a translation by Vignir Jónsson:
His whiskers, sharp as bristles,
His back arched up high.
And the claws of his hairy paws
Were a terrible sight.
A few more images of Jólakötturinn, linked to the site from which they came:
I found this information, exactly, on several different websites -- none credited. So I have made my best guess about which was the originating site and linked to that one.