The Dwarf snowman hat was used to make a Dwarf Snowman during the 2007 Christmas Event. When the Christmas event ended players could no longer go to the Land of Snow, therefore you could not make snowmen anymore or get anything from the Land of Snow, including hats. You could use it outside of the land of snow during the event by making a snowman and using the hat on it. Many other items were released to be used on that day such as Dragon Longswords and Dragon Full Helms, but none of them could be traded or wielded by players. They were released only for decorating snowmen.