The Decoration Event is a limited time event in Tiny Death Star, added as part of the Game Update on December 12, 2013. A new tab appears on the top right hand side of the main game screen. It is a green tab with the image of a Decorator Droid in it. Selecting the tab will bring you to the Reward screen shown below. Palpatine would occasionally show up in the lobby and remove all the decorations, requiring the player to restart the entire progress.
UPDATE: Many users have seen instability in the event. Application crashing and all progress being deleted. Rewards gained seem to remain in place however. No additional information provided by App Developers as to acknowledgement of the bug, if there is a fix or if progress can be restored.
These droids will periodically appear as indicated by a green snowflake icon in the lower left portion of the screen. Selecting the icon will put the decorator droid on the elevator and you can deliver it to which ever floor you like. Once you stop at a floor you will be asked for confirmation to deliver the droid. The droid will then 'decorate' the level by hanging a string of red and green Christmas lights. As you decorate more floors, you become eligable for more rewards. You can view some of the decorated floors here.
Progress toward Decoration Event Rewards can be made by decorating any floor in your Death Star. Deliver an Imperial Decorator Droid to a floor to decorate that floor. You can also summon a Decorator Droid for 4 from the event tab. Once you have decorated enough floor to reach a reward level, the event tab will be highlighted with a red exclamation mark and the droid will start waving one arm.
You can truly decorate any floor; residential, commercial and even Imperial (the Detention level looks much better with Christmas lights).