The Tomte (Nisse in Norwegian and Danish) is close to what's called a gnome in English, and usually lives somewhere on the farm. As long as it is respected, and offered food for Yule eve/Christmas eve, it will help take care of the farm. If it is not respected, it will play lots of little or big pranks, like tipping over a bucket with milk, or opening the barn door to let the animals run off.
It does NOT spy on children, and frankly, they live in a completely different universe than the modern Santa.