From the ABC News website:
The Virgin Mary. The three kings. A few wayward sheep. These are the figures one expects to find in a traditional Christmas nativity scene. Not a smartly dressed peasant squatting behind a rock with his rear-end exposed.
Yet statuettes of “El Caganer,” or the great defecator in the Catalan language, can be found in nativity scenes, and increasingly on the mantelpieces of collectors, throughout Spain’s northeastern Catalonia region, where for centuries symbols of defecation have played an important role in Christmas festivities.
During the holiday season, pastry shops around Catalonia sell sweets shaped like feces, and on Christmas Eve Catalan children beat a hollow log, called the tio, packed with holiday gifts, singing a song that urges it to defecate presents out the other end.
These traditions, in the case of the caganer dating back as far as the 17th century, come from an agricultural society where defecation was associated with fertility and health.
While the traditional caganer is a red-capped peasant, more modern renditions have gained popularity in recent years.