Xmas Camera is a cute, free novelty iPhone app that allows you to adorn your photos of friends and family with holiday add-ons like beards, Christmas hats and snow flakes.
It's nothing fancy, but I can see people having fun with this. Add a Santa Beard to your wife or girlfriend, or pop a red hat on one of the kids.
The app is simplicity itself to run. Snap a photo, or take one from your camera roll. Then go to the library of clip-art and place it on your photo. You can re-size or rotate any element. Once you fix up your photo, you can email it, send it to Facebook or publish to Twitter.