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How do LED Christmas lights work?

Light Emitting Diodes or LEDs are now considered "the greatest invention in lighting since Edison's light bulb in 1879."

LEDs are constructed from tiny solid-state chips similar to those used in computers. These chips directly convert electricity to light without the use of a filament or glass bulb. (Standard incandescent bulbs create light by transmitting electricity through a resistant filament which creates heat. A bi-product of the heat created is light.) LED lights encapsulate solid-state chips in solid (and nearly indestructible) epoxy plastic that can be made into a variety of shapes and sizes.