Holiday Jam Countdown '09: "Fairytale of New York" by Billy Bragg, The Pogues, Stars, Bob Schneider
"Fairytale of New York" by the Pogues (featuring Kirsty MacColl) is my favorite holiday tune, tied with "Christmas Wrapping." I think "Fairytale" encourages the highest-quality covers of any seasonal song too. Evidence below.
Billy Bragg and Florence and the Machine (via Slicing Up Eyeballs):