People used to hang their stockings above the fireplace to dry them out after washing them. I don't know if this is a true story or not but I have read that a long time ago in Europe there was a rich man that lived in this village and his name was Nicholas. At Christmas time he would go around to the poor peoples houses and slip gold coins into the stockings that where hanging over the fireplace. They say this is how the story's of saint Nicholas started that later turned into Santa Clause

A few variations on the tradition of hanging stockings: From http://www.classbrain.com by Sarah Lane STOCKINGS Do you know why we hang stockings on the fireplace? Long ago it was said that Saint Nicholas (now called Santa Claus) threw 3 coins down a chimney of the home of 3 poor sisters. Each of the coins landed inside separate stockings left on the hearth (fireplace) to dry. It is now a modern tradition to hang stockings there in hopes that we might have the same good fortune. From http://www.bbc.co.uk/dna/h2g2/A665949 The Christmas Stocking The custom of hanging a stocking on the hearth or bed post on Christmas Eve in the hope that it will be filled with presents the next morning started about 400 years ago. It originated in Holland where children placed wooden shoes next to the hearth on the 5 December, the night traditionally associated with St Nicholas or Sinterklaas. The children would fill their shoes with straw (for the white horse that carried the gifts) and food for St Nicholas. Stockings, pillow cases or shop-bought 'Santa sacks' were substituted for the shoes in Britain, most of Europe and in North America with the popularisation of Father Christmas or Santa Claus during the 20th Century.