What is an indulgence?
An indulgence is like a matching charitable gift program at your businesses. If you give to a charity, the company will give as well, maybe matching your gift or giving even more.
The Catholic Church asserts that it has a deep well of spiritual graces that she can give to those who make at least a nominal effort to open their hearts to these graces by participation in prayers and special ceremonies.
It also teaches that while living a holy life (good works) does not "earn" salvation, it does help to heal our souls from the effects of past sin--the damage of which must be healed in purgatory (which is a gift, not a punishment) so we can enter Heaven with fully healed souls rather than souls still clinging to grudges, avarice or other traits that cannot persist in the light of God. Everything that is not god-like must be purged for us to fully be in God's presence.
Indulgences, then, are a gift from the treasury of Church's graces which assist us in the spiritual healing, like a medical salve, which would otherwise take place in Purgatory. But unlike physical medicines, these indulgences work only to the degree one's heart and mind are open to them.