Бадњак/Badnyak is oak tree and has similar simbolics as Christmas tree in western tadition. Badyak symbolises God Jesus Christ - its burning is symbolical sacrifice. Also, Serbs make big fires with oak tree as a memory of fires made by shepherds on the Christmas Eve.
Here is an excerpt from a reportage:
"...As the priest chants, the choir responds a cappella, filling the air with praise, thanks, and petitions to God. "Thy nativity, O Christ God, hath arisen upon the world as the light of wisdom," they sing, while Very Reverend Father Radomir Chkautovich censes the people and the badnjak with fragrant incense. After calling down blessings upon the water, he sprinkles the crowd and tree by dipping the basil into the water.
"O Lord Jesus Christ, our God, who did plant the Tree of Life in paradise so that it might bestow upon us eternal blessedness," intones Chkautovich. "Bless also now this tree which is a symbol of Thy cross and the Tree of Life in paradise, and which reminds us of Thy holy birth and of the logs which the shepherds of Bethlehem kindled to warm themselves when they came to worship Thee, the divine infant, and thereby prefigured Thy salvation-bearing cross."
As the prayer ends, the badnjak is tossed on the bonfire. Flames devour dry leaves, and smoke from the offering rises above. A brave contingent of those assembled--mostly young boys and men--converges on the tree in pursuit of a good branch. In a race against the fire, twigs are twisted off...
taken from "Blessing of the Badnjak: Serbian Orthodox Christmas" by Dan Marshall