I struggle with my judgemental nature all the time, and yet even I have trouble with this "ugly Christmas sweater" designation and all its ironic selfness. I think a lot of holiday sweaters started off just as simple fun and not taking things very seriously, as torontogirl says. And yes, perhaps grandma because grandma sometimes dresses to be fun for the grandchildren--not ironic, but fun! And there is a craft-related aspect, for creating items with embroidery and applique's and things, that I admire.
I mean, you can find a lot of bad graphic T-shirts out there too, and find many trends from past decades to make fun of. And many current trends will be so over 10 years from now.
That's one reason why for themed parties I much prefer either an era theme, or book theme, or anything that is not specifically trying to tout one's superior taste in fashion, of all things, by mocking what you would not wear.