OK, I'll try to bring my not-so-unique perspective to this since maybe I have a more balanced opinion. I was raised Roman Catholic and went to Catholic grade school and high school. After 2 years at a Catholic college (Notre Dame), I transferred to a Lutheran college (Concordia) and was soon after confirmed Lutheran.
So, from a 30-plus year lifetime of knowledge from both sides, I'd like to clear up a few things.
1) Yes, Martin Luther was a Catholic. There was nothing else for him to be in 1517. He was also an Augustinian monk (research St. Augustine for background on that order). The Roman Catholic church in the early 16th century was not exactly the pinnacle of moral achievement. During most of the 15th century, the papal seat (the Pope) was a dynasty handed from father to son down through the very wealthy Italian Medici family. Before you get your underwear in a bunch on this, understand that celibacy has not always been a requirement of Catholic clergy, and it was not at that time. However, that didn't diminish the corruption in Rome. The Roman Catholic church had initiated a fund-raising practice called "indulgences." This was accomplished by preaching to the masses that after death we all went to a hell-like place called Purgatory to pay any unpaid price for our sins. After our cleansing trip through Purgatory, we got to go to heaven. The church offered the people the option of paying extra money to the church to buy their loved ones through Purgatory faster. I know this sounds crazy, but it's accurate. More than anything else,
this is what got Martin Luther so upset. So, in 1517, Luther wrote up 95 things he thought that the church in Rome needed to do to again become the Christ-focused organization it was supposed to be and nailed them to the door of the cathedral in Wittenburg, Germany. The majority of these things had to do with the bad examples the church heirarchy in Rome was setting with their immoral actions, the pope running his own private "Get-Out-Of-Hell-And-Purgatory Free" racket, and with the disgusting exploitation of the souls of the dead to line the coffers of the church. There were no statements about salvation through faith. Luther never intended, or desired, to split the church. He was deeply committed to the church and to the Pope as the holder of the "keys" of the church (the "office of the keys" being the authority granted to Peter to bind or loose on earth and thus bind or loose in heaven (Matt 18:18, John 20:23) and passed down to each leader of the church thereafter). I doubt you could imagine Luther's horror at being excommunicated.
2) Regardless of what Luther intended, his courage lit the fire that was already fueled and waiting amongst so many others. Probably primary among these others was John Calvin. Calvin most definitely liked the idea of a church not affiliated with the pope in Rome and went down a whole other path. If there are any Calvinists in our midst, perhaps you could shine more light on this.
3) And so, we have, in fact, really 3 divisions to the worldwide Christian church. We have the descendants of the Roman Catholic church which somewhere along the way cleaned up its act (although they do still support the concept of Purgatory, even post-Vat2). Martin Luther would not be nearly so outraged now as he was then. We have the non-Reformed Protestants, to my knowledge primarily made up of the Lutherans and the Baptists. And we have the Reformed church, which includes the Calvinists and the Presbyterians and the Church of Christ, and the Methodists, and a number of others.
4) We also have some other Christ-oriented churches that are not normally considered "Christian" by the 3 groups above. Among these would be the Seventh-Day Adventists, the Mormons, and the Jehovah's Witnesses.
*deep breath*
5) Ok, now that we have some significant Reformation history out of the way, Tasty's pretty much nailed the sacrament issue. Although I'm not sure how either baptism or the eucharist are optional since both were commanded by Jesus Himself. Jesus said "He who believes and is baptized will be saved", not "He who believes and, optionally, is baptized will be saved." (Mark 16:16). Neither did Jesus say "Take, if you feel like it will help, this is my body" in Mark 14:22.
6) Catholics do pray to God, to Mary, and "with" the Saints. Please take note that prayer to is not the same as worshipping. Catholics only worship God, they "venerate" Mary, and they "worship with" the saints. There is a distinct difference between the 3. Catholics also believe that Mary was conceived and born without Original Sin. Read that closely. When you hear a Catholic refer to the "Immaculate Conception", they're not talking about the conception of Jesus, they're talking about the conception of Mary in
her mother's womb. Catholics also believe that Mary lived without committing any sin throughout her life, never forsake her physical virginity, and did not die but was taken bodily into heaven much as Elijah was (known in Catholicism as "The Assumption").
7) I've said quite enough, but I did want to add a few more things about Martin Luther. As I mentioned previously, Luther didn't want to split the Catholic church, he just wanted them to clean up. Luther fully supported the existence of Purgatory and vehemently defended the institution of private confession as holy, just, and completely necessary. He firmly believed that the Pope in Rome was endowed by God with powers of grace beyond that of any other living person and that these powers should be used to "bind and loose." Over time, Luther got more used to being outside the church in Rome and, through various debates, expanded his theology well beyond its original scope. But you can read his Large Catechism if you want more detail. The good Lord knows I've gone on long enough.