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It's one of those Shakespeare speeches, I think, like "To be or not to be", where everyone knows the first line or two lines, and then very little about what comes next. Portia is talking about mercy, which, she argues
...blesseth him that gives, and him that takes:
'Tis mightiest in the mightiest; it becomes
The throned monarch better than his crown
Being merciful, she argues, blesses the person being merciful, and the person who receives the mercy. It is, therefore at its strongest, shown by people who are the most powerful. It becomes a monarch (i.e. is more kingly) better than his crown does.
His sceptre shows the force of temporal power,
The attribute to awe and majesty,
Wherein doth sit the dread and fear of kings;
But mercy is above this sceptred sway,
The king's sceptre shows the force of his power on earth ("temporal power"), and is part of his awe and his majesty, which is why people dread and are scared of kings. However, mercy is above the influence and power of the sceptre ("sceptred sway")...
It is an attribute to God himself;
And earthly power doth then show likest God's
When mercy seasons justice.
Mercy is an attribute of God himself, the king of kings. And earthly power becomes most godly when it is merciful: when decisions of justice are "seasoned" (made more palatable) with mercy.
Hope it helps!
There is one other irony near the end of the speech.
Portia points out:
... Therefore, Jew,/Though justice be thy plea, consider this:/That in the course of justice none of us/Should see salvation. We do pray for mercy,/And that same prayer doth teach us all to render/The deeds of mercy.
"In the course of justice none of us should see salvation" is an excellent summary of basic Christian doctrine, and there is some truth in the caricature that Christianity emphasizes mercy (or "grace") while Old Testament Judaism emphasizes justice (or "law").
However, the concept of mercy is not foreign to the Jewish Scriptures. To take just one of many examples, here is an excerpt from Psalm 130:
O Lord, hear my voice./Let your ears be attentive to my cry for mercy./If you, O Lord, kept a record of sins, O Lord, who could stand?/But with you there is forgiveness; therefore you are feared.
With Scriptures like this, Shylock could certainly be a man of mercy and still be a consistent Jew. However, he is unaware of his own need for mercy. He thinks of himself as someone who has never demanded more than his due, and who is now asking for simple justice. He is not aware of ever having had mercy extended to him. Therefore, he feels no mercy for anyone else.
Portia is aware, though Shylock is not, that in just a few moments Shylock is going to be pleading for mercy. After she uses the technicalities of Shylock's agreement (or "bond") to show that he cannot legally take a pound of flesh from Antonio, she will show that Shylock's obvious attempt to murder Antonio puts him in the position of being fined all his goods. She will then ask Antonio to show mercy to Shylock.
When Portia speaks to Shylock of the beauties of mercy, she is giving him a chance to embrace it for its own sake, without any obvious mercenary motives. But, like most of us, Shylock cannot see the beauty of mercy until he is in a position where receiving justice would ruin him. By pointing out that "we all need mercy," Portia was trying to get Shylock to see that in having mercy on another person, we are setting a precedent for someone to have mercy on us. In pardoning another, we are pardoning ourselves. Or as a very famous Jew once said, "Forgive, and you will be forgiven. For with the measure you use, it will be measured to you." (Luke 6:37 - 38)
Though it is not obvious from the rest of the play, this speech indicates that Portia herself must be aware of her own shortcomings and her own need for mercy.
Portia shows several characteristics in this speech. The first is that she is intelligent and logical. She also uses strong references to the Christian faith against Shylock, the Jew. Thus, she shows a strong religious belief. Her argument begins with the idea that forgiveness benefits the person doing the forgiving as well as the person forgiven. In an obvious allusion to Christianity, she says that forgiveness and mercy are a part of the character of God and that by seeking justice without mercy Shylock may well damn himself because he will disobey God's law. She is also self-confident. She shows give no apology for her beliefs and in fact implies that hers is the superior faith. This speech contributes to the theme that in showing mercy, one becomes closest to God. In the "love we show towards our friends, the compassion we show those in trouble, and the forgiveness we offer" to those who "sin against us", we show that we love and obey God.
Portia's entire wonderful speech in Act IV goes as follows:
"The quality of mercy is not strain'd,
It droppeth as the gentle rain from heaven
Upon the place beneath. It is twice blest:
It blesseth him that gives and him that takes." It shows several things about Portia's character. Mercy, however, is not primary among them. A blend of intelligence and boldness come well before mercy. She's a woman arguing law and ethics in a male-dominated society. After that, the next quality is found in the metaphor: it recognizes that mercy, like rain, falls unevenly, and (to extend the metaphor) sometimes fails to soak in. This means, she knows it will not be "absorbed" by Shylock as it should.
As far as themes, this relates to both the theme of mercy and the tension between appearance and reality.
In Act IV sc.1 Portia disguised as lawyer "Balthasar" arrives at the duke's court to save Antonio from the evil clutches of the malicious Shylock. Earlier the Duke and the others present in the court had failed to convince Shylock to be kind and merciful towards Antonio and spare his life, but Shylock remains adamant and unreasonable and replies:
Portia, to begin with, requests Shylock to be merciful but he arrogantly turns down her plea. It is then that Portia makes a long and eloquent plea for mercy on Antonio's behalf.
She says mercy is a noble and tender feeling which should spring spontaneously from the heart of a person. It is like the gentle showers from heaven which nourish the earth. It blesses the person who shows mercy by making him feel good and earning for himself a heavenly reward in addition to the blessing of the recipient of his mercy. It is a powerful attribute "enthroned" in the heart of a mighty emperor. It is a noble and divine attribute and when a person tempers harsh justice with mercy he becomes like God himself. She then directly appeals to Shylock to spare Antonio's life saying that just like how we all pray for mercy and are saved by God being merciful towards us we should also be merciful to others.
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