I put items in a bag that represented a part of the song. I went around the room and had several children pull them out of the bag. As we sang the song, they had to figure where their object fit in. They would then hold it up for everyone to see. After singing through it once, the second time they knew when to hold up their object and it gave the children a visual to go along with the song. The kids loved this and it was really very simple.
Here are the items that I used:
Picture a stable in Judea
Picture a sacred, silent night. (pillow)
And can you hear, the angels near
and see the star so bright.
Picture a little baby Jesus
think of his life and words so dear
Sing praise to Him
Remember Him (a ribbon to tie on their finger or wrist to remind them)
as you picture Christmas this year. (hold up a picture of the nativity)
Picture the kind and gentle Joseph
Picture the mother, Mary, fair
And can you see, so reverently, the Shepherds kneeling there
(Repeat Chorus with same object)