"I will believe that the white that I see is black if the hierarchical Church so defines it."
The abuses of the Catholic Church in the Early Modern Period led to Martin Luther publishing his Disputation on the Power and Efficacy of Indulgences (one of the main reasons it was felt reform of the Church was needed was that the Pope sold "indulgences", which supposedly allowed people to buy their way through purgatory). Soon, the cancerous fire of Protestantism began to spread through Europe. Spain and France were forced to abandon their decades old animosity to combat it, and a series of revolutions began which would bring about the downfall of the Spanish Empire and change the face of Europe forever1.

The Catholic Church had not been caught unawares by the reformation - it had been battling dissent and heresy for years. Its response was actual reform and a conservative reaction to Protestant doctrine. One of the most important movements in the Catholic reformation were the Jesuits, or Society of Jesus, founded by Ignatius of Loyola. The Jesuits preached total obedience to Church doctrine and for the rituals of Catholicism that the Lutherans so despised to be lavishly financed. The Jesuits were able to have a lot of influence because they acted behind the scenes in Catholic monarchies, often as confessors to royalty.

Such was the extremism of the Jesuits, they declared their mission to be the rooting out and destruction of all non-Catholics, including non-Christians. Given the chaotic nature of this movement and significant Protestant gains made in Europe, the Catholic Church was eventually forced to call the Council of Trent. Some far-reaching reforms were instigated, including the banning of indulgences and a decree making priests live in the area they preached in (see Decrees of the Council of Trent for the full list).

However, the Catholic Reformation was too little, too late. Although Catholicism remained a major world religion it would eventually cease to be the majority religion of the West.

1. The peasants began to see the reformation as a way to social empowerment as Luther urged them to push for democracy. See Peasants War, 1524-1525.