While the birth year of Jesus is estimated among modern historians to have been between 7 and 2 BC, the exact year, month and day of his birth are unknown, and for several hundred years Christians were persecuted, preventing them from publicly establishing an annual Nativity holiday.
Still, the best guess is that immediately before the emperors Constantine and Licinius issued the Edict of Milan in 313 A.D., about 5-10 percent of the population of the Roman Empire was Christian. While these percentages may seem low, they translate to millions of converts. Assuming a total population of about 55 million in the Roman Empire at the time, the number of Christians would have been somewhere between 2.75 million and 5.5 million. http://elektratig.blogspot.com/2011/12/how-did-christianity-grow-before-edict.html
The Edict of Milan legalized Christian worship, but it is not until the Chronology of 354 A.D. that there is early evidence of a celebration in Rome on December 25 of a Christian liturgical feast for the birth of Jesus. http://en.wikipedia.org/wiki/Christmas
Sometime between 337 and 352 A.D. Pope Julius I split the birth of Jesus into two distinct celebrations: Epiphany stayed on the traditional date, and the Nativity was added on December 25th. http://en.wikipedia.org/wiki/Pope_Julius_I
In the Early Middle Ages, (400 – 1000 A.D.) Nativity Day was overshadowed by Epiphany, which in western Christianity focused on the visit of the magi. The prominence of Nativity Day increased gradually after Charlemagne was crowned Emperor on Nativity Day in 800 A.D. and by the High Middle Ages (900 – 1200 A.D.) the holiday had become so prominent that chroniclers routinely noted where various important people celebrated the holiday.
At the same time, it should be remembered that during the holiday season the popular gift-giving feast day was that of St. Nicholas on December 6, and the actual word “Christmas” did not enter the language until the period of Middle English, (between the 1100 and 1400 A.D.)