They use their bushy tail to wrap around the pads of their paws and to protect their nose from the cold, when they are sleeping. (http://www.wolfsource.org/?page_id=70)

Wolves use their tails to communicate. For example, the tails position and the state of its hair send specific messages. Wolves also have a scent gland on the back surface of their tails which they use to scent-mark territory. (http://www.animalcorner.co.uk/wildlife/wolves/wolf_anatomy.html)