The Romans honored Saturn, the ancient god of agriculture, each year beginning on December 17 in a festival called the Saturnalia. This festival lasted for seven days and included the winter solstice, which at that time fell on December 25 (today, following calendar reform, it falls on December 21). During Saturnalia the Romans feasted, postponed all business and warfare, exchanged gifts, and temporarily freed their slaves. With the lengthening of daylight, these and other winter festivities continued through January 1, the festival of Kalends, when Romans marked the day of the new moon and the first day of the month and year.
By the 4th century another factor was also at work. Many Romans also celebrated the solstice on December 25 with festivities in honor of the rebirth of Sol Invictus, the “Invincible Sun God”, or with rituals to glorify Mithra, the ancient Persian god of light (see Mithraism). Sol Invictus was a religion to which both Constantine himself before his confession of Christianity, and his predecessor Diocletian who had rebuilt the Roman Empire, were especially devoted, and to whom the latter had attributed his military successes (though Constantine saw Christ as having delivered him from the former Roman order’s designs: Diocletian at one time had had Constantine living under his eye, against his will, separating him from his father). Constantine is therefore assumed to have found it convenient to find a common major festival for both Sol Invictus and Christianity.
Source – visit Wikipedia for more History and Traditions at: http://en.wikipedia.org/wiki/Christmas