Learn Italian: Loro festeggiano il Natale in famiglia. - They celebrate Christmas with their family.

In English, we just say "Christmas", but Italian uses the definite article for holidays, so it literally says "the Christmas". This is similar to how you use il for dates, like il 25 dicembre (the 25th of December).

Why does "in famiglia" translate to "with their family"? Shouldn't it be "con la famiglia"?

in famiglia is a set phrase that literally means "in family." It is the most natural way in Italian to say you are spending time or doing an activity with your relatives. While you could technically say con la loro famiglia, in famiglia is much more common and sounds more natural.

Does the verb "festeggiano" come from the word for party?

Exactly! It comes from the noun festa, which means "party" or "holiday." The verb form is festeggiare (to celebrate). Since the subject is loro (they), the verb takes the "they" ending to become festeggiano.

Is the word "loro" required at the beginning of the sentence?

No, it is optional. The ending of the verb festeggiano already tells us that the subject is "they". You only need to include loro if you want to emphasize that they are the ones celebrating, as opposed to someone else.