You better watch out, you better not cry,The interpretation isn't difficult. It's a Christmas song and Jesus ("Santa Claus") came the first time on Christmas Day and He's coming back for Judgment Day. In the meantime He is watching you and keeping score and every good and bad little boy and girl will get what they have coming to them so YOU BETTER BE GOOD!
You better not pout, I'm telling you why,
Santa Claus is coming to town.
He's making a list and checking it twice,
He's going to find out who's naughty and nice...
He sees you when you're sleeping,
He knows when you're awake,
He knows if you've been bad or good,
So be good for goodness sake!
So we all (well, most of us) sort of try to be good (as we each define "good"), but we're worried because actually we haven't always been all THAT good (even by our own lax standards!) and lo and behold, Christmas comes- an annual dress rehearsal for the Great White Throne, and YAY!!!- we got lots of goodies.
And so did the brat next door and the bully on the playground and the delinquent down the street and... pretty much everyone we know, regardless of how good or bad they seemed to actually behave.
It seems Santa is pretty much just bluffing, trying to squeeze a few random acts of kindness out of any gullible boys and girls, but he's really just a big old pushover who loves giving out toys and in the end, he just throws out all his lists and scorecards and EVERYONE GETS THE GOODIES!
Yay! Yay! and Double Yay!
And that's how God works and that's how salvation works and that's how the final judgment will work and so go ahead and try to be good if you want, but it really doesn't matter much to the Grand Ol' Teddy Bear in the Sky.