Lord Shiva blessed Vasuki and wore him as an ornament around his neck. What is the story of Lord Shiva and Vasuki and for what reasons Lord Shiva blessed him?
There are two or so interpretations of why Lord Shiva wears Vasuki around His neck. The Pauranick tale talks of Shiva being impressed with Vasuki's role in the Churning of the Ocean and blessed Him to be ever close to Him and what better way than wearing Vasuki as a necklace.
According to the Puranas, during the churning of the ocean of milk (samudra manthan), the deadly poison (halahala) came out which Shiva had to drink to save the world. There were some snakes in the water who drank it with him and Vasuki was one of them. Vasuki also served as the rope that was tied to Mandar mountain during the churning of the ocean of milk. Shiva was impressed by this and hence accepted Vasuki (king of sarpas) around his neck. The Lord wearing the deadly snake like an ornament signifies that He is independent of time and death and as a matter of fact, is in control of the time.
Lord Shiva is also Pashupathinath - the protector of all animals.
Lord Shiva is also known as Pasupathinath, the lord of all creatures and as another story goes, it is believed that once when the snake species was in danger, they approached Lord Shiva for Shelter. Lord Shiva gave them shelter by letting them stay in Kailasa. But due to cold weather, the snakes used to approach Lord Shiva for warmth of Body. Thus, He as a protector used to wear these snakes as an ornament to provide warmth to them.
Being a Lord of the animals He also has a complete control on their behavior. Since a snake is one of the most feared and dangerous animals in the world, the garland of snakes around the neck firmly establishes this fact that even the snakes fear Him and remain under His control.
Further interpretation - logical not paurincal - The snake stands for all the evil and demonical nature in the world. By wearing the snake around his neck, Lord Shiva gives us the assurance that no evil can touch us or destroy us once we surrender to him, seek his protection and worship him with deep devotion.