Title text: He sees you when you're sleeping, he knows when you're awake, he's copied on /var/spool/mail/root, so be good for goodness' sake.
This comic was posted on Christmas Eve in the United States. While Christmas is principally a Christian holiday celebrating the birth of Jesus on December 25, there are many tradition around the holiday, among them a tradition in United States that in Christmas Eve Santa Claus will make his round delivering gifts to good children.
Rob sits behind a Linux computer and tried to change his user account from his normal access to the access of a super user by using the command "sudo su". Sudo is a famous phrase in xkcd lore, made famous by comic 149: Sandwich. When Rob is unable to use "sudo" because his account is not authorized, the system says that the incident "will be reported" (usually to the system administrator, so he can see if someone is making repeated attempts at accessing administrator privileges).
In the comic, however, Sudo and the system report the incidents to Santa Claus, who in Christmas lore makes a list of who is naughty and who is nice. If you are nice, you get presents, if you are naughty, you get a lump of coal. When sudo reports to Santa that Rob's account is not authorized, he puts Rob on the naughty list.
In the title text, which is a parody of the famous Christmas song, "Santa Claus Is Coming To Town",
/var/spool/mail/root is the root (superuser) mailbox on a Linux system, where the incident described in the comic would commonly be reported to.
- [Rob is sitting at a computer. The computer's prompt is shown.]
robm@homebox~$ sudo su Password: robm is not in the sudoers file. This incident will be reported. robm@homebox~$ █
- [Megan approaches.]
- Rob: Hey — who does sudo report these "incidents" to?
- Megan: You know, I've never checked.
- [Santa Claus is sitting at a desk supported by candy canes, with a red monitor. On the wall are two lists labeled 'naughty' and 'nice'. He is adding a name to the 'naughty' list.]