Symbolism, Imagery, Allegory
Relics may seem weird to us today—pieces of bone from the saints?—but they were very popular in medieval times. Ornate containers, called "reliquaries," were made to hold the body parts, and they were enshrined in churches all over Europe. You can still see them today. The pilgrims in The Canterbury Tales were on their way to Canterbury Cathedral to visit the relics of St. Thomas Becket. Relics are what get the whole story going in the first place.
Because venerating relics was such a popular custom, there was a brisk trade in their sale, and the potential for abuse was widespread. Once bone fragments or splinters of wood from the true cross were distributed all over Europe, it was impossible to determine whether they were authentic. How many heads of John the Baptist could there be? How many foreskins could Jesus have had? Fake relics were a huge problem for the Church. So one symbolic meaning of the relics in this story is religious fraud and corruption. Our Pardoner is Exhibit A. He goes out of his way to explain how he's got legitimate letters from the Pope, etc., etc., in order to convince everyone that his fake relics are real.
A second symbolic meaning is that they refer to the controversy about whether fake relics could produce true repentance. There was a general consensus that they could. If thinking you were holding a fragment of the wrist bone of St. X made you reflect on his or her piety, which made you want to emulate it, then it didn't matter if the bones were from "pigges" as the Pardoner's were.
Third, there's been a lot of scholarship about the sexual symbolism of the pardons and relics. The Pardoner announces that he keeps the relics in his "male," the bulging purse he keeps in his lap. Pardons were usually rolled up pieces of parchment, with round metal seals dangling from them. Get the image? Now, there's also a lot of scholarship about the fact that there was something sexually weird about the Pardoner. In the General Prologue, we're given the narrator's opinion that he was a "geldyng or a mare," i.e. possibly a eunuch, a man with absent or non-functioning testicles. He's got thin hair on his head, none elsewhere on his body, and he speaks in a kind of falsetto voice. He's a very lewd guy, and brags a little too much about having a girlfriend in every town.
Add to that the Pardoner's challenge to the Host to come over and kiss his relics, and you get the idea. The Host isn't amused, and says he'd rather cut off the Pardoner's balls than kiss his relics. One Chaucer scholar has written that the Pardoner, by amassing relics and pardons, is trying to compensate for the sexual potency he lacks. She notes that the Pardoner seems obsessed with body parts, not bodies—hands, mouths, stomachs, bines—because his own body is incomplete. All the relics are substitutes for his own missing parts.
Pardons, or indulgences, were a legitimate part of what Professor John Fleming calls the "penitential economy" of the Middle Ages. Only God could forgive sin, but priests could act as God's agent in confession, and archbishops and popes could issue pardons that were a kind of diploma that indicated that the bearer's punishment for sin would be lessened. Kind of like a commuted sentence. They were supposed to be given only if someone had been charitable to the poor or the church, or performed compassionate deeds, or truly repented in Confession. Any money earned from the sale of pardons was to be designated for charity.
Things got out of hand in the later Middle Ages, though. Taking advantage of the people's fear of damnation, unscrupulous pardoners sold pardons, real and fake, to the highest bidder, and kept the money for themselves. But not everyone believed that you could buy salvation. Martin Luther broke from the Church over this matter, among others, resulting in the Protestant Reformation. Like relics, pardons in this story represent the church's corruption and greed.