Pope Benedict is granting indulgences for people taking part in World Youth Day. An indulgence is the remission of the temporal punishment incurred when a person sins. The Catechism of the Catholic Church has a more formal definition of indulgences:

An indulgence is the remission before God of the temporal punishment due to sin, whose guilt has already been forgiven, which the faithful Christian who is duly disposed gains under certain prescribed conditions through the actions of the Church which, as the ministry of redemption, disposes and applies with authority the treasury of the satisfactions of Christ and the Saints.

For more on indulgences, read this page on the World Youth Day website.