"I just thought he's a good player and he can play several positions for us, he can play in a midfield or attacking-midfield role if we want to change our system," manager Harry Redknapp told the BBC on Thursday.
"We've lost Aaron Lennon (to injury) so we haven't got a great deal of width. We can play a diamond formation if we want to and he can be a big player in that system.
"So, yes, we took him on loan until the end of the season to see how it goes."
The 31-year-old had also been a target for Tottenham's heavily-indebted Premier League rivals West Ham United, who hope to bring in two new strikers in their fight against relegation.
"We thought we had a deal and the player had even had a medical," West ham co-owner David Sullivan told the BBC earlier this week. "We then heard that Tottenham were trying to speak to the player.
"I can't say I am happy about it but I believe in karma and what goes around, comes around."
Redknapp was quoted in the London Evening Standard on Thursday saying: "We've been talking about Gudjohnsen for nearly two weeks and when we heard West Ham were interested we made our move.
"We are not paying a penny more than West Ham were offering him. Two identical deals were on the table. In the end it was a straight choice for the player."
