The use of holly to decorate homes pre-dates what we think of as Christmas. The earlier pagan festivals particularly Saturnalia which marked the winter also saw evergreen plants brought indoors. The holly and particularly its red berries symbolised eternal life. The red was also thought to ward off witches.
Traditionally the Holly was supposed to be brought into the house by a man and it was thought to keep livestock healthy if hung in a cowshed. As Christmas took over from the earlier pagan festivals Christians adopted holly into their celebrations. The plant even appears in a Christmas Carol, The Holly and the Ivy. This song may be as much as a thousand years old, the version we know today was published by Cecil Sharp in 1911.
A small sprig of the holly would also be used on top of the Christmas pudding. Nowadays images of holly decorate cards, Christmas cake, crackers and wrapping paper.