Until I saw the movie Dogma, I thought indulgences hadn’t existed since the Council of Trent. And while the definition has been fleshed out over the years, indulgences are still a part of the Church. The corrupt selling of indulgences was the major issue Martin Luther had with the Church. He didn’t disagree about the belief in indulgences, just the selling of them. People mistakenly acted like they could buy indulgences and pay for penances. Indulgences got reformed, but not removed.
Indulgences don’t forgive sins. That comes in Reconciliation, which is an individual’s responsibility. Indulgences shorten, or lessen, temporal punishment. Once a sin is forgiven, there is still penance. Indulgences deal with penance, not the sin itself.
Indulgences can lessen temporal punishment by drawing from the Treasury of Merit. While to me this sounds like a Ferengi term (I’ve been watching a lot of Star Trek: DS9 recently), the Treasury of Merit actually refers to the exchange of grace from God to the faithful. Here’s how the exchange works: We don’t have to work on our salvation alone. Others can pray for each other (including those in purgatory), or do an act of charity. The Church has the wealth of the saints and other faithful, and thus is able to grant indulgences to individuals, not just to help them, but to encourage deeper devotion, penance, and charity.
I liked this explanation from newadvent.org: “Since the satisfaction of Christ is infinite, it constitutes an inexhaustible fund which is more than sufficient to cover the indebtedness contracted by sin, Besides, there are the satisfactory works of the Blessed Virgin Mary undiminished by any penalty due to sin, and the virtues, penances, and sufferings of the saints vastly exceeding any temporal punishment which these servants of God might have incurred. These are added to the treasury of the Church as a secondary deposit, not independent of, but rather acquired through, the merits of Christ.”
There are two types of indulgences: partial and plenary. A plenary indulgence remits all temporal punishment, while partial remits, obviously, part. To gain an indulgence, a person must be free from mortal sin and perform good works (prayers, pilgrimage, alms, etc) with a contrite heart and with the intention of gaining an indulgence.
From the Vatican, concerning the Year of Faith and indulgences:
"During the Year of Faith, which will last from 11 October 2012 to 24 November 2013, Plenary Indulgence for the temporal punishment of sins, imparted by the mercy of God and applicable also to the souls of deceased faithful, may be obtained by all faithful who, truly penitent, take Sacramental Confession and the Eucharist and pray in accordance with the intentions of the Supreme Pontiff.
(A) Each time they attend at least three sermons during the Holy Missions, or at least three lessons on the Acts of the Council or the articles of the Catechism of the Catholic Church, in church or any other suitable location.
(B) Each time they visit, in the course of a pilgrimage, a papal basilica, a Christian catacomb, a cathedral church or a holy site designated by the local ordinary for the Year of Faith (for example, minor basilicas and shrines dedicated to the Blessed Virgin Mary, the Holy Apostles or patron saints), and there participate in a sacred celebration, or at least remain for a congruous period of time in prayer and pious meditation, concluding with the recitation of the Our Father, the Profession of Faith in any legitimate form, and invocations to the Blessed Virgin Mary and, depending on the circumstances, to the Holy Apostles and patron saints.
(C) Each time that, on the days designated by the local ordinary for the Year of Faith, ... in any sacred place, they participate in a solemn celebration of the Eucharist or the Liturgy of the Hours, adding thereto the Profession of Faith in any legitimate form.
(D) On any day they chose, during the Year of Faith, if they make a pious visit to the baptistery, or other place in which they received the Sacrament of Baptism, and there renew their baptismal promises in any legitimate form."
It all can get sort of complicated, and I understand why the idea of indulgences turns some people off. But that’s what is great about many things in the Church like indulgences, the Rosary, and the Stations. None of it is mandatory. If some practice like that bothers you, you can ignore it. What’s important is whatever gets you closer to Christ. The Church provides these indulgences and resources to get us as close to God as we can, because let’s face it: we need as much help as we can get.