We do both. We have a fake one for family gifts and another small fake one int he front window. On Christmas eve I go to Lowe's just before closing and get a real tree for less than $10. I then decorate it with the wife and put the Santa gifts under that. The kids think Santa brought the tree and gifts.
I like this idea. My significant other is from Austria. There, it's traditional for Santa to bring the tree, as well as the gifts! So there is no tree set up ahead of time....the kids get up on Christmas morning to find a fresh, decorated tree with gifts underneath. How cool is that? My kids are grown up now, so it's a little late to try to start that tradition here, but maybe when we have grandkids.
Oh -- fresh or fake? There are merits to both. I used to think it was "greener" to have a fake tree and not cut down a fresh one every year. Since then I've learned that the fake trees are much more detrimental to our environment, and fresh trees are grown for the market using sustainable methods. Food for thought.
Either way, the smell of fresh spruce in the house is a must-have at Christmas! Get out the pine-scented candles or lamp oil. Combined with the smell of cookies baking, and an old holiday record on the stereo, that spells Christmas to me.
Have a great holiday everyone and thanks for reading!