The Elf on the Shelf is a fairly new Christmas 'tradition'.  The Elf first made its appearance in the book The Elf on the Shelf:  A Christmas Tradition in 2005.  The book was written by 

Carol Aebersold and her daughter, Chanda Bell and is based on a family tradition that Chanda and her sister, Christa had when they were growing up.  Carol Aebersold had an elf doll that would 'magically' appear in a different part of the house every morning running up to Christmas.  Chanda and Christa were told the Elf was watching them and it would tell Santa Claus it they hadn't been nice.

In 2004 the book was written telling the story of the Elf being sent by Santa to watch over Chanda and Christa.  The book was published in 2005.  The official book comes with an Elf.  There are two rules with the elf:  You can't touch the elf or it will lose its magic and the elf moves when children are asleep.

Folks who own Elfs on the Shelf create many settings for their Elf during the holiday season.  Here are two of their creative ideas plus a gingerbread creation from Elf on the Shelf.  Enjoy!