Video above is a poem mentioning the Yule Cat its in the native Iceland Language
Basically the sole purpose of the Yule Cat was to scare workers to work harder 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 for Christmas. Those who were lazy could fall victim to the Yule Cat and the Yule Cat one and only goal is to eat you if you do not receive a piece of new clothing for Christmas. Thus the Yule Cat was used to get people to work more. Again the whole who's been naughty, vs who's been nice concept which is a recurring theme throughout Christmas celebrations around the world. "Shop 2COOLGHOULS"
Here are some links to more information on the Yule Cat