Santa made the kiddos ornaments this year. Normally the kiddos get ornaments in their stockings, but I think the elves have made them in the past. This year I think the big man himself, or at least Mrs. Claus, made the ornaments.
They look to be made out of felt, Wunder Under, batting and thread. I found a tutorial I bet Santa used over at the Made blog.
24 minutes ago