An Islamic form of Edict
In Islam, the Qur'an (Holy book) envisioned a single Muslim community (the ummah), but over time the single group began to split by attacks and the rise of sects.
Originally, there was a leader called a caliph("successor") appointed democratically who would lead the Muslims. Over time, the position crumbled as the Islamic governments fell from attacks and power struggles. As Islam lost it's centralized power, various schools of thought arose, which disagreed on certain points and interpretations. Jurists and scholars learned in the Qur'an decided how to apply God's words to changed historical circumstances. Their fatwahs/fatwas (opinions) settle disputes.
The differences are not major, and they all follow the five pillars (central tenets) of Islam. In fact, Muhammad knew that there would be a difference of opinion, and made it clear that any well-meaning interpretation is good, but one that follows Islam and God's will correctly is twice as better.
Since there is no central authority in Islam, there is enormous flexibility and diversity in Islamic legal rulings. Nevertheless, there is often great consensus among Muslim scholars on matters large and small. Fatwas have no weight unless accepted by the community of scholars (ulema). Consensus among scholars is recognized by the broad acceptance of legal opinion. Bearing in mind the religion of Islam has no clergy system, edicts or fatwas are only opinions and not law. In the case of conflicting fatwas, a Muslim must follow the fatwa that his true conscience believes is closer to the truth.
A scholar will determine an answer to a question by using the following sources, in order:
The Qur'an. The Word of God, and explicit on many things, but subject to a difference of opinion in certain areas.
The Sunnah. It's a historical record of how Muhammad lived since he is a role model to everyone. It consists of descriptions of how he prayed, his marriages, and his sayings known as hadiths. Muhammad knew that some misinformation may sneak into this part of the records, so he declared that any of his sayings that contradict what the Qur'an says are false.
The Companions of the Prophet, known as the Sahabah. There were thousands of people who met Muhammad, and hundreds who were close enough to follow his travels and recall some of his sayings. After Muhammad's death, scholars of the time managed to interview hundreds of the people and ask them what they remembered of Muhammad. All the sayings were recorded, and weighted by who they heard it from, and how reliable the character of the person. Every saying is held up to an extremely rigorous standard to determine its authenticity. Many people were asked, to make sure that the saying wasn't altered over the decades. If there is a contradiction or doubt as to the source, the saying is discarded because of reasonable doubt. Hundreds of thousands of sayings were collected, only a few thousand remain.
Self-questioning. Since not everything is mentioned, the scholar will then use his conscience and inner sense of right and wrong to help bring up a verdict is all else fails.
Fatwahs are important today, as there are many things that aren't specifically brought up. One notable recent ruling clarified how to pray if you were in Space, and another described the permisibility of rap
But in today's Islamic states, authoritative religious voices do not command widespread respect, meaning not everyone follows it. There are many different types of fundamentalists who cite the Qur'an in his support.
Since Islam doesn't have a centralized leader like the Catholics' Pope, most of the Muslims turn to the clerics who study the Qur'an for guidance.
Those fatwas usually are pretty ornate theological constructions, similar for example to orthodox jewish interpretation of scripture (Talmud?), or exegisis in the style of the Jesuits. The overwhelming majority of fatwas are on mundane matters (how to wear clothes, how to take bath etc.). It is also not binding by all people of the faith, in fact nobody cares about fatwas issued by little councils. Al Qaeda declared a fatwah declaring it mandatory upon all Muslims to attack the United States in August 1996. However, it was overruled by the rest of the world's scholars, including all the scholars who outranked Osama Bin Laden. Therefore its not a legitimate fatwa.
Lately, there have been some new ones.
I remember one from the University of Cairo stating that suicide bombing is NOT Jihad as it's contrary to certain parts of the Qur'an and thus explicitly forbidden by Islamic law.
In 2002, the Sunni cleric Sheikh Ibrahim Atta Allah in Cairo issued a fatwah on software, music and video piracy. Calling it "the worst form of theft," it is considered stealing and haram (forbidden) in the Qur'an. Not everyone will listen to this proclamation, however. (http://www.law.com/jsp/statearchive.jsp?type=Article&oldid=ZZZ5YOJ9V1D)
Also, an Egyptian scholar declared that calling the 900-number for the show Who wants to be a Millionaire? was considered gambling as you lose money on every call, and thus sinful.
There's a good site at fatwa-online.com where scholars try to answer questions posed. Some are very mundane, such as what way is the most ethical to invest, according to Islam.