Muggles' Guide to Harry Potter/Magic/Nargle

Overview
Nargles are magical creatures that live in mistletoe. As Luna Lovegood is the only character in the series known to believe in their existence, we can safely say they spring from the imagination of Xeno Lovegood.

Extended Description
At Christmas in Harry Potter and the Order of the Phoenix, Luna Lovegood notes that Harry is standing under some mistletoe in the Room of Requirement. When Harry hurriedly steps away, Luna says that it was "good thinking" on Harry's part, as the mistletoe is "probably full of Nargles". Later, Cho Chang is amused at Harry's mention of Luna's belief.

Analysis
Luna's saying that it was good thinking to step away from the mistletoe is an indication that Nargles, if not harmful, at least have unwanted effects if they happen to fall on one.

Harry's later mention of Luna's belief serves to lighten the mood of the following encounter with Cho.

We note that Harry jumped out from under the mistletoe when Luna dreamily pointed out that he was standing right under it. If Luna had in fact wanted to kiss Harry, her mentioning Nargles could have been a change of subject to disguise her disappointment. However, Luna never acts in a way to suggest that she is interested romantically in Harry.