The following is an excerpt from Concise Theology: A Guide to Historic Christian Beliefs by J.I. Packer.
“Christ instituted two rites that his followers were to observe: baptism, a once-for-all rite of initiation (Matt. 28:19; Gal. 3:27), and the Lord’s Supper, a regular rite of remembrance (1 Cor. 11:23-26). These are called “sacraments” in the Western church, “mysteries” in the Eastern Orthodox church, and ordinances” by some Protestants who see the other two words as tainted with unhelpful associations. Scripture has no category-word for these two rites and their Old Testament counterparts, namely circumcision of males as a rite of initiation (Gen. 17:9-14, 23-27) and the annual Passover as a rite of remembrance (Exod. 12:1-27). Biblical teaching, however, warrants classifying them all together as signs and seals of a covenant relationship with God.
“Sacrament is from the Latin word sacramentum, meaning a holy rite in general and in particular a soldier’s sacred oath of allegiance. Study of the rites themselves yields the concept of a sacrament as a ritual action instituted by Christ in which signs perceived through the senses set forth to us the grace of God in Christ and the blessings of his covenant. They communicate, seal, and confirm possession of those blessings to believers, who by responsively receiving the sacraments give expression to their faith and allegiance to God. The effect of receiving the sacraments is “to put a visible difference between those that belong unto the church and the rest of the world, and solemnly to engage them to the service of God in Christ, according to his word” (Westminster Confession XXVII.1)”
The sacraments or ordinances given by God and instituted by Christ, namely baptism and the Lord’s Supper, are visible signs and seals that we are bound together as a community of faith by his death and resurrection. By our use of them the Holy Spirit more fully declares and seals the promises of the gospel to us.