Alignment
This document is a summary and guideline for players confused about the system of alignment and morality in D&D. The truth is that there are a total of four moral "scales" in the game; people who criticise the alignment experience, in my experience, do so because they are falsely conflating one or more of these concepts. While one action may affect several of these metrics, it is important to understand that they are disconnected and separate from each other.
Piety
Piety is nothing more or less than recognition and favour from the gods. It is subjective with respect to the deity in question; Nimbul appreciates acts of trickery, cunning and stealth, and appreciates donations of wealth won through trickery. Belzor would repudiate any of these. It's important to understand that even though alignment as an objective construct exists because there are real, tangible gods in the world of Morus, piety and alignment are not necessarily the same thing. Even a nominally good god may esteem a follower for an evil act in certain circumstances.
Morality
The metric has no mechanical impact, but it is important to note it nevertheless. Morality is the moral impact of your decisions, and it is entirely subjective. From the point of view of a member of the Chosen of Vashidin, killing innocent wizards is vital to save the world from destruction. From a member of the Blades, using poison to inflict an agonizing death on a philanderer is a good act. However, both of these are evil in terms of absolute alignment. It is important to understand morality in order to understand that even if your character is acting in what he feels is "the greater good" and trying to do his best, it is not for him to decide whether his actions are good and evil. Alignment is absolute, while morality is subjective. Understanding that morality exists seperately from alignment is important to allow a world with shades of gray and moral ambiguity, even when objective alignment exists.
Alignment
Alignment is objective morality. Under its rules, there are certain actions which are inherently good, evil, neutral, et cetera. This is not the same as morality; the laws of alignment are absolute and fixed, and if you consistently act in a way that falls in another alignment than your own, you will change in alignment. Alignment stands apart from the morality of ethics; it is an essential metaphysical force, imposed upon the multiverse as part of the endless planar struggle between Good and Evil, Law and Chaos.
The extent to which alignment has an actual, mechanical effect depends on your character. Many characters will never have to worry about it - their actions determine their alignment unbeknownst to them, but their alignment never directly affects them. Some characters, though - such as priests, paladins, or rangers - must pay close attention to their alignment. If they stray too far from their class's alignment, they may lose some or all of their power. Likewise, alignment also becomes relevant when dealing with certain spells and powers - such as a paladin's ability to Detect Evil - and also when determining which afterlife a character goes to when they die. The bottom line is that the effects of alignment are stricty metaphysical - alignment is never a "punishment" for playing "the wrong character". Experience point penalties can, however, be imposed for acting severely out of character, i.e. metagaming.