Hi Neha,
When you say "understand Christmas" do you mean understand the religious significance?
If so, the St. John's Cathedral Bookstore has a lot of great Christmas books for kids about the Nativity. The YMCA on Salisbury Rd. in Tsim Sha Tsui also has a bookstore w/ some religious Christmas books for kids.
If you want more "secular" books, any bookstore should have some holiday books in the Children's section. Books that tell the story of the Nutcracker ballet; books like "The Grinch Who Stole Christmas" and so forth.