The idea of the “Treasury of Merit” was central to the ability of the Roman Catholic Church to grant indulgences to its members. Indulgences were, of course, a major issue that bothered people such as Martin Luther who wanted to reform the Catholic Church and who ended up splitting away from it. Thus, the Treasury of Merit and indulgences have been very important in the history of the world.
The idea of the Treasury of Merit is that various people have done good works during their lives on Earth. The saints, of course, have done tremendous amounts of good works. Even regular people who were very good but who were not saints acquired merit. Jesus Christ, who was (in Catholic theology) a fully human being, also accumulated merit during his life. The merit that he acquired was essentially infinite because he was without sin and he did so many good deeds in addition.
All of this mattered because these people had done more than they needed to do in order to deserve to get into Heaven. In this view, people can get into Heaven if they do sufficient good things during their lives. But many people do so many good things that they have extra merit built up. They have much more merit than they actually need to get into Heaven. The teaching of the Treasury of Merit said that all of this extra merit was not simply wasted. If a person died with this extra merit, that merit would be put into the Treasury. That Treasury was controlled by the Catholic Church.
The existence of the Treasury was what made indulgences possible. The Church could take merit out of this Treasury and give it to people who needed. Those people could then get closer to Heaven than they merited on their own. The Church allowed people to buy this merit by, for example, donating money for important church projects. It was these sorts of indulgences that angered Luther and others.
Thus, the Treasury of Merit was important in bringing the Reformation about. Because there was all of this excess merit built up, the Church was able to help people who lacked merit of their own. The indulgences by which they did this were a source of serious controversy during the Reformation.