The past several years we've struggled over how to best manage our Christmas card list for making mailing labels. I used to export our address list from Microsoft Outlook and then filter out the non-card contacts using a Christmas label, but now our contact list is all on Gmail. Here's the super simple and easy way to make your Holiday Card Mail Merge using Gmail (obviously many other e-mail and address book programs will work for this as well, but gmail is simple, free and works well for the contact export.
Manage your list of contacts (those that will be getting Christmas cards) using the "other" field in your Gmail contact record. then, put "xmas" or some other label to denote those who you want to send cards to - I maintain this list throughout the year, but during the Christmas season, I make sure I add this label for anyone who sends me a card.
Once you're ready to make the labels you export the list to an Excel file, do an auto-filter on the "other" field and your list is ready.
Then do a simple mail merge into Microsoft Word or your favorite word processor and print your labels.