In Catholic doctrine, indulgences are remissions of punishment for sins. In order to receive an indulgence, the sinner must first confess and be granted absolution, and then he or she must perform some sort of act to receive the indulgence. In the medieval period, indulgences were severely abused, and they became a major sticking point in the Protestant Reformation, when people like Martin Luther argued that the Church was clearly deeply corrupt and in need of a return to early Christian values.
The theory behind the indulgence is that even after someone sins and is absolved, he or she will still have to do penance for the sin. Indulgences allow people a choice: they can either atone for the sin in life, or suffer in hell. Sometimes penance could be quite severe, and as a result, the indulgence emerged as an alternative to things like wearing hair shirts or other acts of hardship.
During the First Crusade, the first plenary or absolute indulgence was granted, with the Pope agreeing that all Crusaders who confessed their sins would receive an absolute indulgence. In this case, participation in the Crusade was viewed as an action which would merit the granting of an indulgence.
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To receive an indulgence, someone has several options. Many Christians in the medieval era chose to give alms, engage in heartfelt prayer, or fast, and these acts were deemed appropriate penance for their sins. Over time, however, the practice of giving alms to receive indulgences became corrupted, and Christians were allowed to essentially buy indulgences from Church officials. The practice of exchanging money for indulgences is explicitly banned today.
Christians are also permitted to intercede on behalf of one another to ask for indulgences. In a sense, someone with more credit in the bank could extend a loan to someone else, asking for an indulgence for another person on the basis of their own good behavior. This principle draws upon the idea fundamental to early Christian faith that all Christians are essentially the same body, with Christ at its head.
After the gross abuse of indulgences in the medieval era, a number of reforms were made to the doctrine. Religious officials continue to encourage Christians to pray, donate to charities, and perform other works which could be considered worthy of indulgences, but Christians are reminded that such acts are simply an important part of Christian virtue. Today, plenary indulgences do not exist, although partial indulgences may be granted after someone demonstrates genuine contrition and works to atone for the sin.