I remember my motheer singing this song to me when I was little (she is German). I never knew exactly what she was singing until I ran across a Youtube video of the song with (badly spelled/interpreted) lyrics. My research has so far alluded to this song originating from midwives singing to orphaned infants (mothers dying in childbirth, etc.) Which, if it is true, explains most of the lyrics. The babies mother has died and the midwife sings to calm him and say when he sleeps he will be led by angels to heaven (possibly with his mother though that is not included in the lyric per se). It a very sad song and it seems a strange one to have become a common lullaby for young children.