http://www.apostolic.net/biblicalstudies/legalism.htm
Legalism is like a disease. It is both highly contagious and deadly. It can go undetected and show no fatal symptoms for a long period of time. In the end, however, it always pays its toll. I’ve never heard anyone stand up and boldly proclaim, "I'm a legalist!" If someone realized they were bound by legalism they would surely put an end to it. Unfortunately legalism is very blinding. It's easier for a sinner to realize he is a sinner than for a legalist to realize he is a legalist.As long as we can’t identify what legalism is, it can keep us in its bondage.
Legalism is oftentimes very hard to recognize and can be hard to distinguish from true holiness. This is because the actions of the legalist, and the actions of someone who possesses true holiness are generally the same. The difference is the motive of the heart. One’s motivation is to save themselves, or keep themselves saved, while the other’s motivation is to please the One who died for them. Ray C. Stedman said:
Do you see how subtle this can be? The actual behavior can be exactly the same in the case of a legalist or of one behaving as an authentic Christian. They both may be real Christians and their behavior may be exactly the same, but one is legalistic and other is not. It is what is going on inside that is the issue in question. It is a matter of inner reliance. What are you reckoning on to meet this demand? Are you counting on your own ability, your own adequacy, your talent, your personality? Is that what you are reckoning on in order to accomplish what is expected of you? Well, if you are reckoning on anything other than the activity of God at work in you, you are a legalist! ... The most widespread form of legality in the Christian church is the flesh, trying to do something before God which will be acceptable to him.1
In order to recognize what legalism is, we must first determine what true Christianity is. Christianity "is to manifest genuinely Christ-like behavior by dependence on the working of the Spirit of God within, motivated by a love for the glory and honor of God. True Christian life is fulfilling a law by means of a unique power because of an overwhelming desire. It requires an outward standard or code of behavior, an inward power which makes it possible to meet it, and a motive which drives us on to do so."
2
Legality on the other hand "is a mechanical and external behavior growing our [sic] of reliance on self, because of a desire to gain a reputation, display a skill, or satisfy an urge to personal power. . . . It is religious performance, scrupulous and meticulous in its outward form, but inwardly, as Jesus described it, ‘filled with dead men’s bones.’ "
3
Many believe that to avoid legalism, one must be an antinomianist (a person without any law). Nothing is further from the truth. Neither will the casting off of standards free one from legalism. Legalism is not the establishing of standards where the Bible does not address an issue. One must establish standards, or limitations for themselves. If one has a problem with playing tennis because it takes up too much of the time they should be spending with God, they might want to make a standard for themselves that they will not play tennis. It’s not that the game of tennis that is evil, but the individual gets addicted to the game and loses self-control, allowing priorities to be mismanaged. This limitation might change when they mature as a Christian and can play the sport again in moderation.
On the flip-side of the coin, it is legalism to establish standards for other people when the Bible does not address the issue. Even standards for one’s self can be dangerous if they have the wrong standard. It is possible to be legalistic in the standards you set for yourself. Legality then becomes a "making [of] unwarranted demands on yourself or on someone else, especially in areas which are not prohibited in the Scriptures.
4
There are some things that are black and white in the Scriptures, but others are differing shades of gray. Those areas that are black and white must be preached, and preached hard! Even though the Bible is dogmatic on many subjects, there are other subjects in which it is not. There are some things in which "we are given a great deal of personal liberty, and it is legalism to make standards (particularly for someone else) in these areas."
5
It is legalism when a Christian or group of Christians make rules for everybody else to obey. If others want to do the same things as a particular Christian groups, having the same convictions as they, that is great. If, however, they are being forced to do something against their will, or without understanding, it is legalism. It becomes legality when we make unwarranted demands upon others in areas not prohibited by Scripture.
6
Daniel Segraves wrote concerning legalism:
Essentially, legalism is a reliance upon keeping the strict letter of a law as being meritorious, even apart from faith. As legalism is worked out, it is often expressed in an exaltation of human traditions to a status equal to or superior to God's commandments or in a slavish adherence to a specific rule while failing to note the principle behind the rule and to apply it in similar situations. While the attractiveness of legalism for many people rests in its deceptive promise of assurance of salvation in return for perfect obedience, what it actually produces is fear, condemnation, guilt, and uncertainty. This is because the legalist's faith is misplaced. It is in himself and his ability to adhere to a code of behavior rather than in Christ.7
"Legalism means strict or excessive conformity to a legal code or set of rules. In a Christian context, legalism has two negative connotations: (1) attempting to base salvation on the performance of good works or on the strict observance of rules and regulations and (2) imposing rules on self and others that are not based on clear biblical teachings or principles. We are guilty of legalism if we imply that a person attains salvation by his works or if we preach rules without principles."
8 In fact, the basis upon which the legalist usually justifies his beliefs and practices is mere tradition and authority.