To defend the use of Xmas, the first thing I must explain is that "X" is the Greek letter "chi," and "chi" is the first letter in the Greek word christos, meaning Christ. From the earliest days of the Church, "X" has been used as an abbreviation for Christ. During the days of Roman persecution, Christians used the symbol of the fish to identify themselves to each other because ichthus, the Greek word for fish, was an acronym for their beliefs.
In English, the phrase reads, "Jesus Christ, God's Son, Savior." Note that the CH in ichthus (an English transliteration of the Greek word) would have been represented by an "X," the Greek letter "chi," in the original word. This is the earliest example of "X" being used as an abbreviation for Christ.
Once Constantine issued the Edict of Milan in AD 313 and ended the persecutions, Christians no longer needed to use the secret fish symbol; however, another symbol involving the abbreviation for Christ became prevalent at this time. The common story of Constantine's conversion, immediately prior to the Battle of Milvian Bridge, is taken from Eusebius.
He said that about noon, when the day was already beginning to decline, he saw with his own eyes the trophy of a cross of light in the heavens, above the sun, and bearing the inscription, CONQUER BY THIS. At this sight he himself was struck with amazement, and his whole army also, which followed him on this expedition, and witnessed the miracle.Lactantius. This chronicler records that the sign Constantine saw in the sky before his victory was, not the cross, but the symbol of a Chi-Rho (XP), the first two letters of Christ's name. Lactantius goes on to say this:
Constantine was directed in a dream to cause the heavenly sign to be delineated on the shields of his soldiers, and so to proceed to battle. He did as he had been commanded, and he marked on their shields the letter Χ, with a perpendicular line drawn through it and turned round thus at the top, being the cipher of CHRIST. Having this sign (ΧР ), his troops stood to arms.Constantine later ordered the symbol of the Chi-Rho (also called the labarum) to be used on all his military insignia since he was convinced that Christ had caused him to win the battle. After the fall of the Western Roman Empire, the Chi-Rho continued to be used as a symbol by the Byzantines although it fell out of use in the West.
What did not perish in the West was an understanding that "X" was a perfectly appropriate abbreviation for the word Christ, and this understanding continued into the High Middle Ages and Reformation. In his article "The Origin of 'Xmas,'" Dennis Bratcher writes:
[B]y the fifteenth century Xmas emerged as a widely used symbol for Christmas. In 1436 Johannes Gutenberg invented the printing press with moveable type. In the early days of printing typesetting was done by hand and was very tedious and expensive. As a result, abbreviations were common. In religious publications, the church began to use the abbreviation C for the word "Christ" to cut down on the cost of the books and pamphlets. From there, the abbreviation moved into general use in newspapers and other publications, and "Xmas" became an accepted way of printing "Christmas" (along with the abbreviations Xian and Xianity). Even Webster’s dictionary acknowledges that the abbreviation Xmas was in common use by the middle of the sixteenth century.Xmas was used because it was more economical, not out of disrespect for Christ or a desire to remove His name from the holiday. Anyone seeing the word "Xmas" knew enough to pronounce it "Christmas" (not "exmas") because they understood the "X" properly, an abbreviation for the word "Christ."
Dennis Bratcher sums up the issue well in the conclusion to his article:
So there is no grand scheme to dilute Christianity by promoting the use of Xmas instead of Christmas. It is not a modern invention to try to convert Christmas into a secular day, nor is it a device to promote the commercialism of the holiday season. Its origin is thoroughly rooted in the heritage of the Church.... Understanding this use of Christian symbolism might help us modern day Xians focus on more important issues of the Faith during Advent, and bring a little more Peace to the Xmas Season.