In the real world Excommunication is a religious censure used to deprive or suspend membership in a religious community. The word literally means out of communion, or no longer in communion. In some churches, excommunication includes spiritual condemnation of the member or group. Censures and sanctions sometimes follow excommunication; these include banishment, shunning, and shaming, depending on the group's religion or religious community.
Excommunication in Medieval 2: Total War
In the game Medieval 2: Total War, Catholic factions may be threatened by excommunication by the Pope - the head of the Catholic faith. This will come about principally by waging war against other (non-excommunicated) catholic factions. The Pope will usually give the player warning of imminent excommunication, thus providing an opportunity to avoid it. However, it may not always be in the players best interests to obey the Pope since giving in to his demands - usually by ceasing hostilities with a particular Catholic faction - may rob the player of his initiative and ultimately waste a great deal of resources that have already been committed to a war.
Regardless, should a player become excommunicated for whatever reason, his popularity in friendly Catholic settlements with suffer as a result until reconciliation occurs. It is possible for a Crusade to be called on the lands of an excommunicated faction.
All settlements will receive a public order penalty while excommunicated. The size of this penalty decreases as the level of Catholicism in the settlement decreases. This effectively acts as a partial disincentive to keep religious levels high because some of the penalty associated with religious unrest will be offset by a reduction in the excommunication penalty.
Many players may find the penalties relatively minor and easily ignored, and the excommunication will reset automatically upon Pope or Faction Leader death. As much of the process is tied to the papal approval found in the overview, one could bribe the States for reconciliation. Finally, if you play the Papal States, you cannot act as the pope and ad-hoc offer excommunication, but declaring war on a Catholic state instantly excommunicates them, and the offer of reconciliation is an incredibly powerful diplomacy tool.
Overhaul mods have been known to make more stringent penalties for excommunication and add in traits around the effect as well, most notably Stainless Steel.