From the Holman Illustrated Bible Dictionary (a Baptist publisher):
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SACRAMENT Religious rite or ceremony regarded as an outward sign of an inward, spiritual grace. The rite or ceremony was instituted by Jesus Christ. The Latin term sacramentum means an oath of allegiance and may have originally referred to a vow taken by soldiers entering the Roman army. Christian use apparently began with Tertullian and was the Latin translation of the Greek word mystery (1 Cor. 2:7; Eph. 3:3; Col. 1:26).
The number of sacraments has varied in Christianity. Early Christians used the term to designate baptism. Later, this concept was extended to include the Lords Supper. The Roman Catholic Church practices seven sacraments: confirmation, penance, ordination, marriage, last rites, baptism, and the Eucharist. Protestant churches recognize only two: baptism and the Lords Supper.
The exact meaning of sacrament has varied in Christian history. Roman Catholic theology taught that the sacraments actually convey what they represent, saving grace. In Lutheran theology the promise of the word of God is conveyed through the sacraments.
Reformed theologians underscore the significance of the sacraments in terms of signs and seals of the covenant. In all these confessional traditions, the ritual is connected with the spiritual truth and reality conveyed through the act.
Some sacramental rituals are considered by various Christian denominations to be ordinances. Ordinances, like sacraments, are considered established by Jesus Christ and are observed in obedience to His command. Unlike sacraments, ordinances are not understood to convey some type of grace. Ordinances are rites that commemorate the death, burial, and resurrection of Christ. Ordinances are performed as expressions of loving obedience to Christ. Two ordinances underscore various aspects of the Christians life. The ordinance of baptism is a persons public profession of faith and serves as an initiatory rite of entrance into the community of faith. The Lords Supper is a continuing ordinance denoting the persons ongoing commitment of the life to Christ.
The idea that outward signs convey spiritual realities is taught in the Bible. For example, believers baptism is an outward, public demonstration of the believers spiritual union with Christ.
Non-sacramentalists would do well to emphasize the spiritual realities represented in the ritual as well as the commemoration of Christs sufferings and death. The notion that sacraments convey grace, however, is contrary to Scripture. In its entirety the thrust of the Bible is that grace comes through faith, not works (Rom. 4:3; Gal. 3:6). The understanding that sacraments convey grace implies that a person can, through the performance of some ritual, receive grace as reward for effort. The biblical perspective is that genuine faith produces works. Sacraments are not the automatic or mechanical transmission of divine grace. Genuine faith issues forth in works of faith, but works do not result in the reception of grace.
Stan Norman
Holman Illustrated Bible Dictionary. 2003 (C. Brand, C. Draper, A. England, S. Bond, E. R. Clendenen, T. C. Butler & B. Latta, Ed.) (1428). Nashville, TN: Holman Bible Publishers.