Christmas carols and caroling in the old world was a mix of singing and dancing and was practiced for all festivals throughout the year. When Christmas was firmly established to be celebrated on December 25th, many of the existing carols (or songs) were sung on that day and new ones written to celebrate Christmas.
St. Francis of Assisi was instrumental in making the Christmas celebration one for the people instead of just for the clergy. He created large nativity scenes outside of his church and translated many of the Christmas carols from Latin into languages spoken by the average person and encouraged them to sing these songs to express their joy during the Christmas season.
This practice of singing Christmas songs outside of the Church near the nativity scenes spread throughout Europe and it was a natural next step for these Christmas Carolers to start walking through the neighborhoods around the churches sharing their festive songs. Caroling started to decline in popularity as people were able to hear and play the same songs on the radio and eventually on their own record players, however, carolers can still be seen during the holiday season walking through neighborhoods and sharing the Christmas message much as they have done for the past 1000 years.