What is the Gospel?

The gospel and the law agree in this, that they are both from God, and that there is something revealed in each concerning the nature, will, and works of God. There is, however, a very great difference between them:

1. In the revelations which they contain....

The law was engraven upon the heart of man in his creation, and is therefore known to all naturally [without Biblical revelation] "The Gentiles have the work of the law written in their hearts." (Rom. 2: 15.) The gospel is not known naturally, but is divinely revealed [in Scripture] to the Church alone through Christ, the Mediator....

2. In the...subject peculiar to each.

The law teaches us what we ought to be, and what God requires of us, but it does not give us the ability to perform it, nor does it point out the way by which we may avoid what is forbidden. But the gospel teaches us in what manner we may be made such as the law requires: for it offers unto us the promise of grace, by having the righteousness of Christ imputed to us through faith, ...teaching us that we are just before God, through the imputation of Christ's righteousness. The law says, "Pay what thou owest." "Do this, and live." (Matt. 18: 28. Luke 10: 28.) The gospel says, "Only believe." (Mark 5: 36.)

3. As to promises...

The law promises life to those who are righteous in themselves, or on the condition of righteousness, and perfect obedience. "He that doeth them, shall live in them." "If thou wilt enter into life, keep the commandments." (Lev. 18: 5. Matt. 19: 17.)

The gospel, on the other hand, promises life to those who are justified by faith in Christ, or on the condition of the righteousness of Christ, applied unto us by faith...

4. They differ in their effects.

The law, without the gospel, is the letter which killeth, and is the ministration of death: "For by the law is the knowledge of sin." "The law worketh wrath; and the letter killeth." (Rom. 3: 20; 4: 15. 2 Cor. 3: 6.) The outward preaching, and simple knowledge of what ought to be done, is known through the letter: for it declares our duty, and that righteousness which God requires; ...it finds fault with, and condemns our righteousness. But the gospel is the ministration of life, and of the Spirit, ... and quickens those that are dead in sin,... "The gospel is the power of God unto salvation," etc. (Rom. 1: 16.)

Full text: http://homepage.mac.com/shanerosenthal/reformationink/zugospel.htm