Theory:

(Part II)
Dearest Connie,
I write to you in a much happier frame of mind because something wonderful has just happened that I must tell you about at once. We were all standing to in our trenches yesterday morning, Christmas morning. It was crisp and quiet all about, as beautiful a morning as I’ve ever seen, as cold and frosty as a Christmas morning should be.
 
I should like to be able to tell you that we began it. But the truth, I’m ashamed to say, is that Fritz began it. First someone saw a white flag waving from the trenches opposite. Then they were calling out to us from across no man’s land, “Happy Christmas, Tommy! Happy Christmas!” When we had got over the surprise, some of us shouted back, “Same to you, Fritz! Same to you!” I thought that would be that. We all did. But then suddenly one of them was up there in his grey greatcoat and waving a white flag. “Don’t shoot, lads!” someone shouted. And no one did. Then there was another Fritz up on the parapet, and another. “Keep your heads down,” I told the men, “it’s a trick.” But it wasn’t.
Explanation:
  
This part is about the letter. The author expresses the letter written to a person called Connie. Connie is the wife of Jim Macpherson. Jim had written to share his happiness on that particular Christmas day. He had been standing with his troops in long deep ditches (where soldiers stand to hide from enemies). It was a beautiful cold morning that day, all quiet and clear.
 
Jim wrote that he felt ashamed that he hadn't started it, but Fritz had started. Fritz is a general name given to German soldiers, while Tommy is a general name given for British soldiers. Someone in the opposite troop (Germans) was waving a white flag (as a symbol of peace) to the British troops and shouting "Happy Christmas Tommy" from across no man's land. (No man's land refers to a land that is unoccupied or is under dispute between parties who leave it unoccupied due to fear or uncertainty.) The British soldiers were surprised, and before they could understand what was happening, some of them screamed back "Same to you Fritz!". Jim had thought it was over with that. Suddenly one of them came up in his grey greatcoat and said "Don't shoot, lads!" and nobody shot. Then more and more German soldiers came up one by one. Jim warned his soldiers to keep their heads down, and it was a trick played by the German soldiers. Jim felt they were trying to shoot them by tricking them with their wishes. Later Jim realized there was no trick. Jim understood that the Germans had genuinely wished them.
  
  
Meaning of difficult words:
  
Words
Meanings
Trencheslong deep ditches where soldiers stand to hide from enemies.
Fritza common German name, here refers to the German soldiers
Tommya common English name, here refers to the English soldiers
that would be thatend of the matter
no man's landland that is unoccupied or is under dispute between parties who leave it unoccupied due to fear or uncertainty.
 
Reference:
National Council of Educational Research and Training (2008). Honeydew. The best Christmas present in the world - Michael Morpurgo (pp. 9-16). Published at the Publication Division by the Secretary, National Council of Educational Research and Training, Sri Aurobindo Marg, New Delhi