All Christians believe that humans achieve salvation through the grace of God.
Most Christians of any of the major denominations agree that humans are born in a state of sin. This is a consequence of original sin; a sinful nature is inherited; it is part of the human condition. Traditionally, original sin is explained as a result of the fall of man through the first sins of Adam and Eve in Eden. Some would now reject the story from Genesis as history. But even those who reject it still agree that humans are born in sin. The original state of grace enjoyed by the once-good people God created has been lost, for them and for their descendants. We are born having forfeited any claim to salvation.
God's grace responds to this otherwise hopeless situation. God, at His initiative, sent prophets and other teachers to reveal His existence to humans. He gave the Torah, the Law of Moses, to the Jews, and made them his chosen people to provide a moral example to the rest of humanity.
It was also through the Jews that God's grace sent his Son, Jesus Christ, who sought to make atonement for the sins of the human race through his crucifixion and subsequent resurrection. God's grace is freely given, on behalf of the humans He has called to salvation. God was not obliged to save anyone; humans cannot make themselves good enough to earn their way into Heaven on their own initiative, or give rise to a duty on God's part to save them. It is only through the redemption bought by Christ's sacrifice that anyone is saved, and the path of salvation for humans lies in participating in that redemption.
Grace, then, is God's initiative and choice to make a path of salvation available for humans. On this, almost all Christians agree, though they may disagree on the meaning of some terms, or on which parts of the narrative of grace to emphasize. But from here out, it gets more contentious.
While a single word rendered into English as grace is not strictly speaking present in the Hebrew Bible, a number of concepts used to describe God in Biblical-era Judaism are forerunners to the Christian concept of grace.
One such concept is named by the Hebrew word chesed, which in one of William Tyndale's happier coinages was translated as loving-kindness. The core concept here centers around the faithfulness and forbearance needed to make the covenant relationship continue, despite the several incidents of backsliding by the covenant people to which the Hebrew Bible bears witness.
Other Hebrew concepts used to describe the grace of God include a group of words whose basic element is hanam, which means the spontaneous gift of affection; and raham, which implies mercy and compassion, including the merciful restoration of a broken relationship. All of these concepts are used especially by the Hebrew prophets to describe God's choice of Israel as his chosen people, and His refusal to abandon them despite their violations of the covenant.
The New Testament word that is usually translated "grace" is in Greek charis (χαρις), which literally means "gift". The word was not often used by Jesus himself; in the canonical Gospels it is spoken by Him only in the Gospel of Luke and the Gospel of John. However, the parables attributed to Jesus in the Gospels make clear that Jesus did in fact teach the concept of grace. More importantly, He told stories that underlined that grace was God's to give, God's sole prerogative, and that it was freely offered.
Parables such as the Workers in the Vineyard, Matthew 20:1-16  (http://www.biblegateway.com/cgi-bin/bible?passage=Matthew+20%3A1-16&search=&version=KJV&language=english&optional.x=15&optional.y=11), tell of an employer (who in the traditional Christian understanding, represents God) who hires some workers early in the day, some later, and some an hour before quitting time, then pays each of them the same amount. When the workers who worked all day balk, the employer's explanation is, Is it not lawful for me to do what I will with mine own? . . . So the last shall be first, and the first last: for many are called, but few are chosen. Matt. 20:15-16 (KJV)
Similarly, the well known parable of the Prodigal Son, Luke 15:11-32  (http://www.biblegateway.com/cgi-bin/bible?language=english&version=KJV&passage=Luke+15%3A11-32&x=16&y=12) is traditionally understood by most Christians as containing the teachings of Jesus on grace. A son demands the family fortune and wastes it, then returns home expecting little in the way of good treatment. The father welcomes him handsomely, over the objections of his other son who stayed at home and served dutifully.
Many throughout Christian history have perceived a common thread in these parables of Jesus: the grace of God is something that upsets settled human notions about merit, about what is deserved, and what is due as recompense.
The basic outline of the later dispute appears in the New Testament itself. The parables of Jesus seem to preach grace that seemed broad enough to forgive any sin, and to be available regardless of the seeming unworthiness of its recipient. But He also raised the bar for what was expected of His followers in what seemed needed to obey the Ten Commandments. (See, Sermon on the Mount) An apparent contradiction was brewing here.
The difficulty becomes yet more focused in the New Testament epistles. St Paul of Tarsus wrote that For by grace ye are saved through faith: and that not of yourselves: it is the gift of God: not of works, lest any man should boast. Ephesians 2:8-9 (KJV) For St Paul, salvation, like the wages of the labourers in the parable, is God's gift at God's sole prerogative. Were it achieved by human effort, people could take pride in their efforts toward holiness, and God's gift of grace would be diminished in contrast to human effort. This would contradict his clear teaching of the universal problem of sin. (E. g. Romans 3:9-20  (http://www.biblegateway.com/cgi-bin/bible?language=english&version=KJV&passage=Romans+3%3A9-20&x=17&y=8) )
A sharply contrary perspective is presented by the Epistle of James 2:1-26  (http://www.biblegateway.com/cgi-bin/bible?language=english&version=KJV&passage=James+2%3A1-26&x=18&y=11), concluding that faith without works is dead. By "works," James here appears to include both acts of charity, and righteousness according to the code of laws; the preceding text mentions charity to the poor as well as sins against the law of Moses. An inward change, the forsaking of old sinful ways, and being reborn in a spirit of generosity is to James the true test of conversion. Without these things, claiming to have "faith" is a sham. Grace must be something that steels the Christian to avoid sin and practice charity. Without these signs, it seems likely that grace was never there.
The First Epistle of John maintains this tension throughout. On the one hand, it repeatedly claims that those who "walk in the light" do not sin and do enjoy fellowship with God, while those who "walk in darkness" have no fellowship with God. However, it also describes receiving forgiveness of sins through confession and God's grace.
Various later theologies profess to resolve these approaches in different ways, but the plain texts of the Epistles appear to contradict one another.
Sociologists of religion, analysing the functioning of religious faiths and institutions as social structures without specific regard to their doctrines, have observed that religions operate differently, require different institutional forms, depending on how integrated they are with the surrounding society. Labels that have been given to some of these relationships include cult, sect, denomination, and ecclesia. In roughly ascending order, these terms relate to the integration of a religious institution with the society that surrounds it.
After the close of the New Testament period, the Christian church underwent a number of dramatic changes in its relationship with the surrounding society, and with the Roman Empire, the principal government of the area where the Christian movement operated. To simplify greatly, these changes took the church from a period where the persecution of Christians was an ever-present threat, to a time when the Emperor Constantine ended all persecutions of Christianity and made its practice legal. The Roman Emperor, moreover, took an active interest in the way the Christian church was run, calling the first Council of Nicaea to resolve a dispute in church doctrine over Arianism. Many historians believe that he was motivated to encourage unity in the Church as a way of preserving unity in his Empire.
The history of Christianity at this point is of a remarkable reversal of fortune. No longer a rejected minority, Christians enjoyed political clout. The rulers took an active interest in who the church leaders were. Cæsar acted to settle disagreements between them. Former pagans, seeing that their emperor now favoured the Christians, lined up to join.
At this time, the Roman Empire's days as a unified political entity were already numbered. There were cultural divisions between the Greek speaking Eastern Roman Empire and the Latin Empire in the West. There were also substantial economic and military discrepancies between the relatively prosperous East and the relatively exposed West. This division would lead to the collapse of the Latin Empire in less than two hundred years. This, too, affected the fortunes of Christianity as an institution.
These changing relationships with the Roman Empire and civil authority in general likely changed the focus of the church's teachings. When the Church was an outlawed society, its writings often focused on legalism, since a large issue was the permitted scope of Christian liberty within the context of the larger pagan society outside its boundaries. When the Church became a powerful institution enjoying the favour of the imperial state, and indeed an arm of the Empire, it seemed more important to focus on the danger of antinomianism, in order to bolster its authority in a crumbling Empire.
According to Eusebius, the Roman emperor Constantine I was not baptised until shortly before his death in the year 337. To some this might suggest that his commitment to Christianity was lukewarm; in an attempt to rebut this suggestion, a contrary suggestion was made. Christians at the time of Constantine, or at least at the time this explanation was devised, believed that the performance of the ritual itself conferred forgiveness of sins. This, however, was a one shot deal; post-baptism sins cannot be forgiven in a second ritual, and could only be resolved by penance. By postponing baptism until the last illness, it made it unlikely that the believer committed a serious sin between baptism and death. Another explanation is that many people at that time followed a very strict interpretation of the passages in 1 John that said Christians do not sin; since they thought themselves unlikely to stop sinning upon their conversion, they put off their conversion and baptisms until shortly before death. Thus, postponing their baptisms was understood as an act of humility.
From a contemporary perspective, it is impossible to tell what Constantine intended. But the theology assumed in this explanation suggests that the concept of grace as understood by Constantine may have been altered into something Protestants find hard to fit into the New Testament's treatment of the concept.
Rather than God's property to be offered at His sole discretion, in Western Christianity at least, grace had become a sort of spiritual currency, and the Church was its banker. Believers acquired grace by participating in the Church's sacraments. The sacraments were effective in conferring God's grace by virtue of their being performed, provided that the liturgist was authorised by the Church to perform them. The grace offered through the sacraments enabled Christians to lead a better lives and to deepen their faith.
Grace was furthermore particularised into justifying grace, the grace received when God forgives a believer's sins; and sanctifying grace, the grace which enables the believer to do good works and acts of piety. Justifying grace continued to be God's sole prerogative, but sanctifying grace was contingent on the believer's willingness to perform acts of charity and piety, and refrain from sins. In addition to sanctifying grace, merit was earned by good works]; by this merit, believers can earn the right to rewards from God.
Conversely, sins reduce your merit before God and incur a debt to Him in the divine economy. Sufficiently serious sins not only remove merit, but also extinguish sanctifying grace in the baptized believer's soul, which can be restored by the sacrament of penance. These sins are mortal sins[?] or deadly sins. Less serious sins, venial sins[?], incur loss of merit. Believers whose accounts were overdrawn at the final accounting went to Hell; believers without enough merit for Heaven went to Purgatory, where they could work off the debt they owed to God.
Fortunately, some saints achieved so much merit in their lifetimes on Earth that they got into Heaven with some to spare. This surplus was called works of supererogation[?], the Church's treasury of surplus merit. The Church can offer the excess merit in its treasury to be applied to the deficits in merit suffered by its penitent sinners. Pope Clement VI proclaimed this to be a doctrine of the Roman Catholic Church in 1343.
In the fifth century, a debate that affected the understanding of grace in Western Christianity, and that was to have long reaching effects on subsequent developments in the doctrine, took place between Pelagius and St Augustine of Hippo.
Pelagius, a British monk, was concerned about the retention of human moral accountability in the face of God's omnipotence. He strongly affirmed that humans had free will and were able to choose good as well as evil. Pelagius denied that original sin had extinguished God's grace in Adam's heirs, and that consequently human beings had the power to do good, to convert themselves from sin by their own power, and the ability to work out their own salvation. Religion's purpose is to teach us virtue, from which we can expect reward from God. By great efforts, it is possible for humans in the flesh to achieve moral perfection.
Pelagius's seemingly optimistic creed in fact burdens weak mortals with a burden too great to bear; or at least this was part of the response of St Augustine. More importantly, it does not clearly explain why Jesus Christ had to die for anyone's sins; if people can redeem themselves by their own efforts, atonement by Jesus on the Cross was at best a vague sort of moral example. The taint of original sin in fact did extinguish God's grace in human souls; no matter how righteously they conducted themselves, their virtues could never make them worthy of the infinite holiness of God. Humans are massa peccati, a mess of sin; they can no more endow themselves with grace than an empty glass can fill itself. While we may have "free will" (liberum arbitrium) in the sense that we can choose our course of conduct, we nevertheless lack true freedom (libertas) to avoid sin, for sin is inherent in each choice we make. It is only by God's sovereign choice to extend His grace to us that salvation is possible.
Pelagianism was repudiated by the Council of Carthage[?] in 417, largely at Augustine's insistence. Some still hold to Semi-Pelagianism[?], which holds that though grace is required for men to save themselves at the beginning, there remains a trace of moral ability within humans that is unaffected by original sin.
Purgatory (this was a post-Great Schism innovation in the West), and no "treasury of surplus merit". Instead, the Eastern Church has emphasized the role of the Holy Spirit in the Christian's life, and has maintained ascetical disciplines such as fasting and almsgiving not as a way to make penance for past sins or to build up merit, but as a means of spiritual discipline to avoid sinning in the future, to exercise self control and avoid being enslaved to one's passions and desires.
Before considering criticisms that characterised the Protestant Reformation, of the notion of grace as a sort of spiritual currency, it may be worth a moment to pause to consider its virtues. It built up the Church, by providing people with a clear sense that their acts of service to the Church would be rewarded by God. It stressed the dire consequences of sin. It reassured people that the rituals of the Church effectively pardoned their sins committed after baptism and restored them to the state of grace.
It was open to serious question, though, whether the notion of grace as spiritual currency was authentic to the teachings of the New Testament. The doctrine also proved subject to a number of abuses.
Martin Luther's posting of his ninety-five theses to the church door in Wittenburg in 1517 was a direct consequence of the mechanical sacramentalism and treasury doctrines of the mediæval church. The act was precipitated by the arrival of Johann Tetzel, authorised by the Vatican to sell indulgences[?].
The effectiveness of these indulgences was predicated on the doctrine of the treasury of grace proclaimed by Pope Clement VI. The theory was that merit earned by acts of piety could augment the believer's store of sanctifying grace. Gifts to the Church were acts of piety. The Church, moreover, had a treasury full of grace above and beyond what was needed to get its faithful into Heaven. The Church was willing to part with some of its surplus in exchange for earthly gold. Martin Luther's anger against this practice, which seemed to him to involve the purchase of salvation, began a swing of the pendulum back towards the Pauline vision of grace, as opposed to St James's.
Luther taught that humans were helpless and without a plea before God's justice, and their acts of piety were utterly inadequate before His infinite holiness. Were God only just, and not merciful, everyone would go to Hell, because everyone, even the best of us, deserves to go to Hell. Our inability to achieve salvation by our own effort suggests that even our best intention is somehow tainted by our sinful nature. This doctrine is sometimes called total depravity.
It is by faith alone (sola fide) and by grace alone (sola gratia[?]) that humans are saved. Good works are something the believers should undertake out of gratitude towards their Saviour; but they are not necessary for salvation and cannot earn anyone salvation; there is no room for the notion of "merit" in Luther's doctrine of redemption. (There may, however, be degrees of reward for the redeemed in Heaven.) Only the unearned, unmerited grace of God can save anyone. No one can have a claim of entitlement to God's grace, and it is only by His generosity that salvation is even possible.
As opposed to the treasury of grace which believers can make withdrawals from, in Lutheranism salvation becomes a declaration of spiritual bankruptcy, in which the penitents acknowledge the inadequacy of their own resources and trust only in God to save them. Accepting Augustine's concern for legal justification as the base metaphor for salvation, the believers are not so much made righteous in Lutheranism as they are considered covered by Christ's righteousness. Acknowledging that they have no power to make themselves righteous, the penalty for their sins is discharged because Jesus has already paid for it with His blood.
Eager to give all the credit to God's mercy, Lutheranism therefore downplays the role of humans in achieving their own salvation. John Calvin expanded these themes in his Institutes of the Christian Religion in 1536. The logical structure of Calvinism depends on a syllogism:
The notion that God has foreordained who will be saved is called predestination, generally; the Calvinist concept of predestination is its most controversial expression, largely because it is the most unflinching statement of the doctrine. The good news that God has freely granted the gift of salvation to those who believe has here been darkened by the thought that what He can freely grant to some, He can withhold from others.
Calvin sought to provide assurance to the faithful that God would actually save them. His teaching implied what came to be known as the doctrine of the perseverance of the saints, the notion that God would actually save those who were his Elect. The actual status and ultimate state of any person's soul were unknown save to God. When assurance of election was rigorously pressed as an experience to be sought, especially by the Puritans, this led to a legalism as rigid as the one Protestantism sought to reject, as people were eager to demonstrate that they were among the chosen by the conspicuous works-righteousness of their lives.
Calvin's extreme position provoked a reaction. In 1547, the Council of Trent, which sought to purify Roman Catholicism from the Protestant controversy, established Catholic teaching on grace and justification as distinguished from Protestantism. It taught that justification and sanctification were parts of the same process. Grace actually enables believers to become more righteous through the power of the Holy Spirit. (http://ic.net/~erasmus/RAZ195.HTM) Various actual Protestant doctrines were stated in extreme forms and mixed with older heresies and generally condemned by the Council, whose work formed the basis for the Roman Catholic Counter-Reformation.
In 1618 Jacob Hermann[?], better known in the Latinised form Arminius, put forth a contrary position that sought to reaffirm human free will as opposed to the eternal decrees of Calvinism. Arminius taught that God's grace was offered to all, and that it could be rejected by the human will. It was possible for a believer to lose faith and backslide, losing the salvation that believer once possessed. These positions came to be known as Arminianism. With respect to the Calvinist Reformed churches, they were rejected by the Synod of Dordt in 1619.
Later, John Wesley also rejected the Calvinist doctrine of predestination. His most comprehensive pronouncement on the subject was his sermon "Free Grace,"  (http://gbgm-umc.org/umhistory/wesley/sermons/serm-128.stm) preached at Bristol in 1740. In Wesley's position, the believer who repents and accepts Christ is not "making himself righteous" by an act of his own will, such as would alter his dependency on the grace of God for his salvation. Faith and repentance, rather, are the believer's trust in God that He will make them righteous.
Wesley's rejection of Calvinism was more successful than Arminius's, especially in the United States of America, largely beause it was spread through popular preaching in a series of Great Awakenings. The churches of New England, with roots in Puritan Calvinism, tended to begin to reject their Calvinist roots, accepting Wesley's version of Arminianism, or overthrowing their historical doctrine entirely to depart into Socinianism. Arminianism is, of course, the standard teaching of Methodist churches.
At about the same time that Calvinists and Arminians were debating the meaning of grace in Protestantism, in Roman Catholicism a similar debate was taking place between the Jansenists and the Jesuits. Cornelius Jansen's 1640 work Augustinus sought to refocus Roman Catholic theology on the themes of original sin, human depravity, the necessity of divine grace, and predestination, as he found them in the works of St Augustine. The Jansenists, like the Puritans, believed themselves to be members of a gathered church called out of worldly society, and banded together in institutions like the Port-Royal convents seeking to lead lives of greater spiritual intensity. Blaise Pascal attacked what he called moral laxity in the casuistry of the Jesuits. Jansenist theology remained a minority party within Roman Catholicism, and during the second half of the seventeenth and eighteenth centuries it was condemned as a heresy, though its style remained influential in ascetic circles.
Protestantism in either variety, Calvinist or Arminian, emphasize God's initiative in the work of salvation, which is achieved by grace alone through faith alone, in either stream of thinking - although these terms are understood differently, according to the differences in systems. The Protestant teachings on grace suggest a question, however: what is the role of the Church in the work of grace? The Reformation churches taught that salvation is not ordinarily found outside of the visible Church; but with the increasing emphasis on an experience of conversion as being necessary to salvation, Sola fide began to be taken as implying that the individual's relationship with Jesus is intensely individual; we stand alone before God. Since Protestants accept that people are saved only and decisively by their belief in Christ's atonement, they often rank preaching that message more than sacraments which apply the promises of the gospel to them as members of the Church. The sermon replaces the Eucharist as the central act of Christian worship. The church's authority comes from the message it preaches, practically to the exclusion of the sacraments. This is often reflected in the arrangement of the pulpit and altar at the front the church; as preaching becomes more important, the pulpit moves from the side to the center, while the altar for the Eucharist shrinks to the size of a small coffee table or is eliminated entirely.
Thus, the sacraments largely lost even the importance that Calvin and Luther attributed to them, which was already considerably less than that imputed to them by the Roman Catholic Church. This happened under the influence of ideas which first began development among the Anabaptists but spread to Calvinists through the Congregationalist and Baptist movements, and to Lutherans through Pietism. Classically, Calvinism teaches that the sacraments are "signs and seals of the covenant of grace" and "effectual means of salvation", and Lutheranism teaches that new life, faith, and union with Christ are granted by the Holy Spirit working through the sacraments. But when these older ideas are de-emphasized, the sacraments become "ordinances," acts of worship which are required by Scripture, but whose effect is limited to the voluntary effect they have on the worshipper's soul. This belief finds expression in the Baptist and Anabaptist practice of believer's baptism, given not to infants as a mark of membership in a Christian community, but to adult believers after they have achieved the age of reason and have professed their faith. These ordinances may even be considered works-righteousness, which is contrary to salvation by grace, and a hindrance to faith and, certainly not necessary to being a Christian. The ritual as interpreted in light of such ideas does not at all bring about salvation, nor does its performance bring about the forgiveness of sins; the forgiveness which the believer has received by faith is merely pictured, not effectively applied, by baptism; salvation and participation in Christ is memorialized, not imparted, by the Eucharist. Consequently, the Church loses primacy in the believer's experience, and holds only voluntary worth.