Thanks for your question.  I will preface by saying that this is a common question that we receive on this website.   I understand that there are different opinions and beliefs about this topic  and we needn’t proceed to a large debate about how Mormon beliefs don’t fit in perfectly with other Christian denominations beliefs.

Mormons believe that all people can be  saved  through the Atonement of Jesus Christ by obedience to the laws and ordinances of the Gospel of Jesus Christ (Article of Faith 3 ).  And the basic laws  and ordinances that bring about salvation through Jesus Christ are:  first, faith in the Lord Jesus Christ.  Second, repentance of our sins.  Third, baptism by immersion in water.  Fourth, receiving the gift of the Holy Ghost by the laying on of hands (Article of Faith 4).

So, we are saved by the Atonement of Jesus Christ and we gain access to it by faith in Him and by obedience to his commandments.

Here are some other articles dealing with this topic.

The Saved Little Toaster

Works and Grace

Salvation (There is a pretty in-depth conversation on this post  in the comments)

One of the questions that often came up during their visit was whether Mormons believed our works saved us or the grace of Jesus Christ did.  They made an interesting observation: when challenged with this question, each latter-day Saint (even General Authorities) responded with one of two answers.  1) We are saved by the grace of Jesus Christ.  2) Works are necessary for salvation.

On the face of it, we seem confused.  To many Christians, statements 1 and 2 are mutually exclusive; for us they fold nicely into each other.

Consider a toaster.  It has two slots, a mechanical tab, some knobs to control heat levels, heating coils, and a plug connected to the outlet.  The toaster was a wedding gift you gladly accepted from your brother; your dad’s present was to pay your first month of rent, including utilities.  You use your toaster every morning.  Drop in two limp, damp pieces of bread, push the lever down, and wait 35 seconds; then, crispy, deliciously crunchy toast pops out as if by magic!  Spread the butter on thick and enjoy.

As you feast, you make two statements to your new spouse, who does not notice any contradiction:

1) This toast was made through the generous gift of loving relatives.

2) It took some effort on my part (albeit not much) to make the toast.

We certainly can’t take the credit for the toast.  The same effort applied to an empty counter top, or to an unplugged toaster would result in disappointment.  (Maybe the bread would become “crunchy” in the sense of getting stale, but I don’t think that’s what we want).  In the same vein, we fully recognize that living by the law of Moses, or adhering to empty ritualistic tradition without a Messiah will never work.  This is why we respond with number 1.

We also know that we can’t expect the toaster to do everything for us, either.  Much of the joy of eating breakfast comes from taking the time to handcraft it.  Your brother knows that while designing and building a fully-automated toast-producing machine is possible, it isn’t what you need or want.  Besides, there’s still the matter of lifting it to your mouth and chewing.  Surely, you wouldn’t eat pre-chewed toast!  Our purpose on earth is growth, and that requires us to step up to the plate and show our willingness.  Our faith in Christ is manifest to Him by our (imperfect and small) effort.  This is why we give response number 2.

The toaster and its connection to the wall outlet represent the infinite atonement of Jesus Christ.  He offers it to all of us.  Please receive His help gratefully and often.  He loves you, so He will not force your hand.  Insert the bread of faith, and press down the mechanical tab of repentance to unlock the power of forgiveness and blessing that awaits you.  Repentance and righteous living may seem tough at first, but He has made it much easier.  In fact, he has made it possible.

“If ye believe on his name ye will repent of all your sins, that thereby ye may have a remission of them through his merits” (Book of Mormon, Helaman 14:13).

The price to pay for these rewards is ourselves.  Our Heavenly Father asks us to be humble and penitent toward Him and to believe in His Son, Jesus Christ.  When we give ourselves, our will and our lives, to Christ, He gives them right back to us in a purer condition and also with His blessings.  These might be spiritual blessings such as peace in one’s heart or also blessings of prosperity and success.  It is important to realize that He allows us to retain our freedom even when we give ourselves to Him.

This is diametrically opposed to the manner the world sees it and how the world operates.  Many things petition us for our time, energy and will that will enslave us and will never set us free willingly.  I have seen families destroyed by abuse of alcohol and individuals reduced to nothing because of all kinds of destructive habits.  There is no real freedom there.

The power to free us remains in Christ.  We must choose Him to become free spiritually.  “But God did call on men, in the name of his Son, (this being the plan of redemption which was laid) saying: If ye will repent, and harden not your hearts, then will I have mercy upon you, through mine Only Begotten Son.” (Alma 12:33)  That mercy will allow us to break the chains that hold us down and to destroy habits that enslave.

All can be free through Christ.  It truly is a glorious prospect, and not one that comes easy.  It takes a sincere desire to change one’s being, from thought to action, and, more importantly, the humility to understand the powerlessness one has in a current situation.  But where there is a lack of power and ability, Christ makes up the difference.  “But behold, the Lord hath redeemed my soul from hell; I have beheld his glory, and I am encircled about eternally in the arms of his love.” (2 Nephi 1:15)  From binding chains to arms that embrace is a reality that does happen.  I know it does.  I have seen it, I have felt it and I can’t imagine a better way to show my appreciation for it than by sharing it.

In the course of my journey as a member of The Church of Jesus Christ of Latter-Day Saints, there have been numerous times where I have questions come up that challenge my faith.   I can’t speak for all Mormons, but I would assume that we all go through these cycles from time to time.  I picked this topic to write about, because I want others who are not of our faith to know that I do have questions and from time to time finding answers to these questions causes spiritual turmoil.  However, it is during these times that I grow the most spiritually.

The foundation of my belief is rooted in Joseph Smith’s testimony that he was in fact visited by God the Father and Jesus Christ.  This visit came in response to Joseph’s prayer to know which church he should join.  They gave him specific instructions — he was to join none of the churches, because none of them were right (Joseph Smith History 1:1-20).  What followed next in Joseph’s life is phenomenal:  through him Jesus Christ re-established his Church, the Book of Mormon was translated, the authority to act and perform ordinances in God’s name was given to man again, and the list could go on.  I will always remember the day that the truthfulness of this man’s testimony was written upon my heart by the Holy Ghost.  I feel much the same as Joseph did:  I know it and I know that God knows it and I cannot deny it (JS-H 1:25).

However, even though I know Joseph Smith’s story to be true, from time to time, something will come up that causes me to wonder.  For example, polygamy, or how the priesthood was distributed prior to 1978.  These challenges of faith, no matter how big or small, cause me to reflect and evaluate.  Sometimes, they cause me to think, “how could God’s prophet do this, or say that?”  I learned a long time ago that there is a reason; however, in these times I have yet to discover the puzzle piece that makes the picture complete.  Often I have to go back to the basics that I know to be undeniably true–that Joseph Smith was a prophet of God and that he did in fact translate the Book of Mormon.  In other instances, I have to sit down and think about other confirmations that I have received from the Holy Ghost about a particular piece of doctrine, whether it is prayer, fasting, scripture study, marriage, or the priesthood for a few examples.  As I do this and ponder my question throughout the day or weeks, eventually someone will say something, or I will have a thought that comes to me, always accompanied by another confirmation through the Holy Ghost.  Then I can clearly see what I was missing.

These experiences strengthen my faith and further buttress my basic testimony of God.  In this way I have been able to move from truth to truth and from grace to grace, learning about God and the grand plan that He has designed for our eternal happiness.  I am grateful that there is a God and that He loves me perfectly (as He does all of us), even if that means that from time to time I have to struggle in my faith, because it helps me to grow stronger.

It can be a confusing question to answer because everyone has his own definition. Among active latter-day saints, you often need to clarify your meaning of this word. Look outside of Mormonism, and it becomes even more vital.

“I Have Faith in God”
For instance, many people associate the word ‘belief’ with faith; “I have faith in God” to some means that they believe He exists. To others it is an affirmation that God will provide for them. They might phrase it, “I trust God will help me.” A slightly different, more mature way to say it is, “I trust God’s wisdom.” And still another meaning might be better put, “I am faithful to (or loyal to) God,” emphasizing our role in our relationship with Him. As you mature in the gospel, your understanding of faith expands to incorporate all of these elements (and possibly more), but it can be a hard topic to discuss if you’re on one level, and your friend is on another.

For this reason, it may shock some evangelicals (as well as some Mormons) that we actually do believe Paul when he said, “For by grace are ye saved through faith; and that not of yourselves: it is the gift of God:” Ephesians 2:8 We have to really ask ourselves what Paul’s definition of faith included.  It might be more clearly rendered, “For by grace are ye saved through faithfulness…”

Joseph Smith taught two kinds of faith: 1) Faith as a principle of action, and 2) Faith as a principle of power. Not just any faith has power to save you. You might have faith in toothpaste (believing it will clean your teeth), or you could have faith in the Red Sox (believing they can win the world series). These kinds of faith lead you to action (you’ll brush regularly, or you’ll buy a ticket to Fenway Park), but neither of these is associated with any kind of heavenly power.

Faith as a principle of power
The first principle of the gospel is not just faith, it is ‘faith in the Lord Jesus Christ’ (see Articles of Faith 4). He alone holds the keys to your salvation. Remember, though, that salvation is not a place or an event. It is a state of being. The plan of the gospel is developmental, and we are the ones who are supposed to develop.

Because He is gracious, Jesus will accept any sinners who turn to Him, but he doesn’t intend for them to remain sinners. He will send guidance through the Holy Ghost as well as messengers on the earth. The sinners will begin to feel the desire to become better. They will repent and promise the Lord (by covenant of baptism) to remain faithful to the end. Jesus will notice this leap of faith. He will send miracles (see Moroni 7:35-37). In this way, faith becomes a principle of power. As we continue to grow in faith, the Lord gladly and graciously opens the windows of heaven to pour out more and more blessings (see Malachi 3:10).

We do not believe, as some do, that Christ’s grace will save us independently of our actions.  His sacrifice on the cross did not eliminate our personal responsibility. That is not to say that His grace is not sufficient for all, because it is. However, were we saved by grace alone, what would be the point in living a lifestyle of obedience and sacrifice? We could do whatever we desired and still obtain salvation by accepting Christ. Yet God requires that His followers obey Him, whether or not we know (or understand) His reasoning.

The problem here is that we simply cannot be perfectly obedient. Only the Savior could fulfill the demands of justice and be perfectly compliant with the Father’s will. That is why works alone will not suffice. None of us would be able to achieve the expectations placed before us by only our own efforts. We are all dependent on Christ for our salvation. Thus, we need His grace. And we need repentance. We must do our part, which consists of both continuous efforts for improvement and proper repentance.

Let me share part of the explanation from the Bible dictionary:

“It is . . . through the grace of the Lord that individuals, through faith in the atonement of Jesus Christ and repentance of their sins, receive strength and assistance to do good works that they otherwise would not be able to maintain if left to their own means. This grace is an enabling power that allows men and women to lay hold on eternal life and exaltation after they have expended their own best efforts.

Divine grace is needed by every soul in consequence of the fall of Adam and also because of man’s weaknesses and shortcomings. However, grace cannot suffice without total effort on the part of the recipient.”

Christ invites all men to “Come unto me . . . and I will give you rest . . . For my yoke is easy, and my burden is light” (Matt. 11:28,30) But we must first come; He will not simply bestow His lighter burden on all. We must first knock in order to enter in to His rest. We need both to act and accept His divine grace.

Suggested readings on this topic:

The Atonement: Our Greatest Hope
by President James E. Faust (Liahona, Jan. 2002, 19-22)

Words of the Early Apostles: Grace
by Elder Christoffel Golden Jr. (Ensign, Oct. 2003, 48-52)

Beauty for Ashes: The Atonement of Jesus Christ
by Elder Bruce C. Hafen (Liahona, Apr. 1997, 39)

Mortal living tends toward sin. The entire world is steadily becoming worse in this respect. It would be hopeless, except for the Savior who has taken all “sin entropy” on himself. An infinite amount of it. This permits us ~ an infinite number of us ~ to increase in order and goodness and glory, but only if we rely on His payment.

Thermodynamics is a tough subject to get your head around. So is the gospel’s idea of atonement, but luckily we have some great teachers.