This is the first post on sacraments in my ongoing series, theology in bullet points. The first unit in this series had to do with God and Creation (book here), and the second unit was on Christology and Atonement.
We are now in the third and final unit: The Holy Spirit and the Church. The first set of posts in this final unit was on the Holy Spirit. The second set was on the Church. This third set is on sacraments.
1. A sacrament is a divinely appointed means of grace. It is a divinely appointed meeting place where God takes something ordinary and does something extraordinary in us through it. It is an instrument of God by which God transforms us in some way. It is an "outward and visible sign of an inward grace."
Grace again is God's undeserved favor toward us. We often think of God's grace in relation to the atonement and forgiveness God has made possible through the death of Jesus. Yet God gives us good gifts all the time--gifts of power, gifts of blessing, gifts of knowledge. Our lives are full of God's grace in every area.
Ultimately, of course, God has established Jesus as the basis for receiving his saving and sanctifying grace. When we speak of baptism or communion or the Scriptures as means of grace, we are speaking of them as instruments of delivery, not as the real sources or bases of that grace. They are tools that God uses to meet us and change us, but they have no power in themselves. In themselves they are only ordinary water, bread, or words. It is only their connection to God and Christ that makes them conduits of power.
2. Baptism and communion are the two sacraments generally acknowledged by Protestants. This is a list reduced from the seven sacraments of the Catholic Middle Ages, which also included marriage, ordination, penance, confirmation, and last rites.
The Protestant reaction to Roman Catholicism predictably pushed at times to the opposite extreme of its opponent. If there was a tendency in catholicism to think that the sacraments worked ex opere operato, "from the act itself," Protestants tended to emphasize the faith of the person experiencing the sacrament as key. 
Similarly, some Protestants abandoned the notion that there are divinely appointed means of grace at all. For example, Quakers and the Salvation Army do not normally practice either baptism or communion. In a similar vein, Baptists tend to believe that communion is only a memorial of what Jesus did, not that it is actually an instrument of divine change.
3. But surely we can all recognize that God uses all sorts of different means to make us grow. God uses trials to help us grow. God uses Scripture to help us grow. God uses prayer to change us. For Francis of Assisi, all of nature was a sacrament that God could use to transform us and lead us to sense his presence.
Surely there is thus a sense in which there are the "ordinary" sacraments like baptism, communion, Scripture, prayer, fasting, Christian worship and fellowship.  But then there are "momentary" sacraments where God chooses to meet us in some other way by some other means. If a sacrament is a divinely appointed means of grace, then there are as many sacraments as there are ways that God meets us and transforms us.
The key aspects of a sacrament are 1) the medium that God transforms, 2) the work that God does using the medium as an instrument, and, of course, 3) the power of God working. A fourth element is also usually involved, namely, the faith either of the person receiving God's grace or the faith of the community surrounding the person receiving God's grace.
4. The power of God is of course the absolutely necessary component in any means of grace, and in God's will the atoning death of Christ is the basis for God's grace as it relates to our salvation and sanctification. No means of grace works on the basis of the medium alone, ex opere operata. Grace is always a miracle, a divine intervention into human history.
In a sense, the Bible is not Scripture until the power of the Holy Spirit comes over it while we are reading. Exegesis, the study of the original meaning of the biblical text, does not work ex opere operata to transform us or make us more Christ-like. The water of baptism does nothing spiritual unless the Holy Spirit transforms us. The bread of communion does nothing unless God works through it.
God does not need a medium to transform and change us. God can change us of his own will and of his own accord. In that sense, not even faith is necessary for God to change us. Indeed, we can only have faith as a result of God's grace. Faith itself is a gift of God, although God empowers our wills also to be involved in it. 
So God can change us directly, without a medium. In that instance we would not speak of a sacrament being involved. And although sacraments typically involve faith, God can change a person through a medium even if his or her faith is not involved. This is the exception, however, rather than the rule.
The power of God is thus the essential factor in any grace administered in a sacrament, and we would not call the administration of God's grace a sacrament by definition if a medium were not involved.
5. Faith is typically involved in a sacramental event, an event in which God's grace is experienced through a divinely appointed medium. Normally, this is the faith of the person receiving the grace. If I eat the bread and drink the wine of communion, but do it without any faith whatsoever, I am unlikely to receive any benefit from God thereby. Indeed, Paul suggests that such participation can actually be detrimental to us, even cause us to become sick and die (1 Cor. 11:29-30).
Again, God can choose to change us even though we are not expecting it, even though we are not approaching the "sacred moment" with faith.
We can read the Bible only looking for raw knowledge, or only as a book of history or literature, and not be changed. In that case the Bible is only a book, with ordinary words, and not Scripture. We can sit in a worship service and have our minds on something else, and not experience the grace of God through worship. We can say prayers over a meal or before we go to bed without thinking and receive no blessing. We can say the Lord's Prayer, the creed, or any other Christian activity in which others encounter God and them not be sacraments for us.
6. Rituals in themselves are neither powerful or vain. A prayer that is repeated does not have to be "vain repetition" (Matt. 6:7, KJV), but it can be. However, the human psyche is such that ritual actions can be far more powerful than mere ideas. Symbols can be exponentially more powerful than the literal. Accordingly, the literal cannot come anywhere near as close to showing us God as the symbolic and metaphorical.
For this reason, the logical word has no power beside the sacramental word. The act of worship, the act of participation in baptism or the Lord's Supper, participation in prayer and Christian fellowship--these moments have potentially life-changing effect. The pronouncement of a minister, "I pronounce you man and wife," can have a spiritual power if God is present in the moment--much more power than a dictionary definition of marriage.
Those who scorn rituals often have rituals that they do not acknowledge as such. If there is a power to their ministry, we can be sure that there are symbols and rituals present that they do not recognize as such. A church without them is likely a weak and powerless church, a Gnostic church, for this is the way God has created us, to experience him in our bodies, through physical means, in our embodiment, through material media in the world.
7. Since God is the power behind the dispersal of grace, grace can be triggered not only through the faith of the person receiving it, but also through the faith of others surrounding the recipient. Does not James 5:16 say that, "The prayer of the righteous is powerful and effective"? Our prayers can thus be a means of grace for others, even when they themselves do not have faith.
God has certainly used infant baptism throughout the centuries as a means of grace for the child, even though the child him or herself is not yet able to have faith. This is not a "saving grace" in that the child is not thereby "saved." But why would we not believe that God does something in this moment?  Indeed, is it possible that, because of the grace administered, the child could be more likely to believe later on, because the community of faith has surrounded him or her in faith as a child?
In such instances, the faith involved is the faith of the community surrounding the individual rather than the faith of the individual him or herself. When a person is unconscious in the hospital or dying, it is the faith of the person praying for them that can be a means God recognizes to heal. Anointing with oil is another example of a sacramental ritual involving a medium, by which God sometimes dispenses grace (cf. Jas. 5:14).
It is even possible for a believer to exercise faith over someone who is doubting. A person who is dying can sometimes experience doubts. A person can find it difficult to forgive themselves for something they have done. Our human minds are susceptible to dysfunction and neurosis, even psychosis. We can be enslaved to drugs or to various other addictions. At times the Holy Spirit gives power to another believer to be faith for the doubter, to be forgiveness or peace for the disquieted (cf. John 20:23; Matt. 16:19).
So while faith is typically involved in a "sacred moment" and that faith is usually the faith of the individual receiving grace, God can dispense grace through a medium of his own will and he can do so on the basis of the faith of others.
A sacrament is a divinely appointed means of grace, using some ordinary medium to transform us and dispense his undeserved, divine favor. There are ordinary means of grace that God has used time and time again throughout Christian history. But there are also divine moments where God unexpectedly meets us at some place or time and establishes holy ground on the spot, such as at a burning bush. Our faith is usually involved, but God can meet us at the time and place of his choosing, and he can do so because of the faith of others.
Next Sunday: SA2: Baptism is a sacrament of inclusion into the people of God.
 This phrase originally had to do with whether the purity of the priest administering the sacrament was a factor in the effectiveness of the sacrament's work. But the power "of the work working" itself in Protestant debate came to be contrasted with the importance of the faith of the person experiencing the sacrament.
 In Wesley's sermon, "The Means of Grace," he mentions the primary means of grace as prayer, searching the Scriptures, receiving the Lord's Supper, "the ordinary channels of conveying his grace to the souls of men." The reason Wesley does not mention baptism is because most anyone in England at that time would have been baptized as an infant, an act that was not repeated as an adult.
 Faith is the "work" God does using our will as the medium of his grace. He empowers our wills to have the capacity for faith.
 I would suggest that God uses "baby dedications" as means of grace in this way as well, even though such churches or individuals do not want to call the event a "baptism."