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Wow, I just realized, I totally forgot about our conversation, been so busy recently.
But yeah, Sacraments are an outward sign, instituted by Christ to give grace. In other words, they're something which is visable to our senses, but also shows an invisable reality, namely that God confirms santifying grace upon. In addition there can be other invisable realities that are given beyond santifying grace.
The sacraments were pretty much instituted biblically ("f you forgive anyone his sins, they are forgiven; if you do not forgive them, they are not forgiven" - John 20:23 for example for confession). They are either biblically instituted or instituted through Sacred Tradition (aka, things not in the bible which carry the same authority, for example things that Christ said that weren't put in the Bible, but were passed to us via oral tradition) implicitly or explicitly.
Overall, Catholic Encyclopdedia is a great source, and if you have any more questions, feel free to ask.
I need to get back to that conversation, I'll post in the group when I get a chance.