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There are several reasons why elves may have come to be associated with the winter holidays.

For one thing, the land of elves (Alfaheimr) was inhabited by the spirits who created the Sun, and including these beings in the festival would certainly encourage them to rejuvenate the Sun and make it shine again.

A more Yulish theory, though, has to do with Odin the Elf King, whose magical capabilities
were incorporated into the Santa Claus we know today. More than likely, the
elves were thrown in for good measure to complete Santa’s persona. After all,
what’s an elf king without elves?