Good works are necessary for salvation because they increase our faith (Luke 17:5-10; James 2:20-26; Apocalypse 22:12). Work for reward do not (Romans 4:4-5). Indulgences, even when they were allowed to be sold, did not work for salvation, but as penance of a confessed and absolved sin.
An indulgence is a remission of the temporal penalty (penance) imposed by a priest on a penitent as a work of satisfaction for a mortal sin. Such works of satisfaction include prayers, fasting, almsgiving, retreats, pilgrimages. A penitent who defaults on these prescribed works of satifaction can expect to suffer for them in purgatory after death, as well as for any unrepented sins.
Indulgences were given to Crusaders who did not complete their penance before they were killed in battle. They didn't have to suffer in purgatory for these omissions, but went directly to heaven. In 1343, Pope Clement VI proclained the existence of a "treasury of merit", an infinite reservoir of good works in the church's possession that could be dispensed at the pope's discretion. On the basis of this declared treasury, the church sold "letters of indulgence" which covered the works of satisfaction owed by penitents. In 1476, Pope Sixtus IV extended indulgences to cover purgatory for the laity in general.
Originally indulgences were given for the self-sacrifice of going on Crusade to the Holy Land. By the 16th century they were dispensed regularly for small cash payments as a from of almsgiving. They were presented to the laity as remitting not only their own future punishments, but also those of their dead relatives presumed to be sufering in purgatory.
The Council of Trent (1545-1563) re-affirmed the granting of letters of indulgence, but not their sale.