This is a handmade, felted, black cat Christmas ornament – very cute.
There is actually a Christmas or “Yule” Cat (Jólaköttur) legend in Iceland. The Yule Cat is a big scary monster of a black cat and part of a larger Yule family around which many legends are told.
If you do not receive a new item of clothing for Christmas, you will be visited and probably eaten by this cat. The logic is that if you have worked hard to use up your wool, you are rewarded with new clothing and if you are lazy you get punished by the cat. Children were really afraid of this happening and it was a good way to get them to work harder.
I don’t think this little cat above is a Jólaköttur (though both are black…hmmm…) but I like that Icelanders have included cats in their Christmas traditions.