There are three main religions in the Empire. They each give the people social order and a sense of the divine. They contradict each other slightly in how their adherents are supposed to behave, but they are not really at odds at each other politically. They are all true; no one “believes” in one religion and not the others, they simple see more wisdom (or power, or safety) in following one path more than the others.
There are some truths to the metaphysical world of the Empire that no one disputes. When a being is born, he or she is reincarnated from a soul that has gone before. If human, the acts a person performs in life must be accounted for in death. When a thinking being dies, it’s soul goes to Meido, the place of waiting, to be judged by an impartial Celestial Minister.
If you are deemed wanting (as the vast majority are, even if you were a generally good dude), you are sent to Hell where the Bureaucrats of Hell (demons, oni) will punish and torture you, purging you of your sins and your memory and preparing you to be reborn anew.
Rare, exceptionally virtuous people are allowed into Heaven, where they may eat the Peaches of Immortality and converse and carouse with the Ministers of Heaven. That’s not to say that Heaven is all flirting with geisha and navel-gazing – souls in Heaven retain their memories and prejudices in life. Wars are fought in Heaven, too. When Heavenly armies meet, that is thunder crashing over the land, and the rare time when a soul is actually fatally wounded their blood falls from the sky in the form of lightning. To die in Heaven leads, inevitably, to being reborn on Earth, sometimes retaining all the memory of your lives before.
Specific religion rundown:
The Celestial Order: Above all is Lady Sun and Lord Moon. The Emperor represents them on Earth. The people follow the Emperor. The spirits follow the Celestial Dragons and Sun and Moon. The dead follow the Ministers of Heaven and Hell. Priests of the Celestial Order, called shugenja, make sure the order is respected, for if it were ever to fall out of alignment, Earth, Heaven and Hell may all go spinning away and crashing into each other. A clan needs shugenja to invest people moving up in the Celestial Order (new daimyos or peasants becoming samurai) and to calm and control the spirits of the land. This is the “upward-looking” religion, the religion of the highest social orders.
Monks of Renzai: Mystics, compassionate teachers and weirdos. They want each person to find within themselves the power of humanity. They give up their place in the Celestial Order (guaranteeing their rebirth as low-ranking human, or even nonhuman) to find wisdom and give succor to their fellow man. Although sometimes they are just obtuse smelly guys who talk in riddles and jibber out silly prophecies. Everyone respects Monks for their insight, bravery and compassion. This is the “downward-looking” religion, very concerned with lower social classes.
Ancestor Worship: “Respect what has gone before.” Many have died before you to make your place in the world as beautiful, difficult and diverse as it is. Being guided by your ancestors is the most honorable path, as your actions attempt to bring glory and respect not only to your clan but all those of your clan who have died and gone and may be watching now. The shugenja order the world, the monks try to figure it out, but those who study the way of the past are those who are driven and drive others to make the world an honorable, beautiful place. A clan needs ancestor worship to preserve its traditions. This is the religion of the samurai class, the one most involved in the trials and travails of that social class.