The history of Christmas dates back over 4000 years. Many of our Christmas traditions were celebrated centuries before the Christ child was born. The 12 days of Christmas, the bright fires, the yule log, the giving of gifts, carnivals(parades) with floats, carolers who sing while going from house to house, the holiday feasts, and the church processions can all be traced back to the early Mesopotamians.
Other cultures which celebrated these winter festivals include, the Persians and the Babylonians (Sacaea), Scandinavia (Yuletide), ancient Greeks (Zagmuk/Sacaea), Roman (Saturnalia as mentioned).
"Jo Saturnalia!" was a fun and festive time for the Romans, but the Christians though it an abomination to honor the pagan god. The early Christians wanted to keep the birthday of their Christ child a solemn and religious holiday, not one of cheer and merriment as was the pagan Saturnalia.
But as Christianity spread they were alarmed by the continuing celebration of pagan customs and Saturnalia among their converts. At first the Church forbid this kind of celebration. But it was to no avail. Eventually it was decided that the celebration would be tamed and made into a celebration fit for the Christian Son of God.
The 25th was not only sacred to the Romans but also the Persians whose religion Mithraism was one of Christianity's main rivals at that time. The Church eventually was successful in taking the merriment, lights, and gifts from the Saturanilia festival and bringing them to the celebration of Christmas.
The exact day of the Christ child's birth has never been pinpointed. Traditions say that it has been celebrated since the year 98 AD. In 137 AD the Bishop of Rome ordered the birthday of the Christ Child celebrated as a solemn feast. In 350 AD another Bishop of Rome, Julius I, choose December 25th as the observance of Christmas.