Final answer:
The Peace of Augsburg was a 1555 treaty within the Holy Roman Empire that allowed rulers to choose Lutheranism or Catholicism as their territory's religion, which recognized the Lutheran Church and aimed to reduce religious conflict.
Step-by-step explanation:
The Peace of Augsburg was a pivotal agreement in 1555 that allowed rulers within the Holy Roman Empire to choose either Lutheranism or Roman Catholicism as the official religion of their territories. This agreement acknowledged the Reformation and ended the religious struggle between the two faiths for a time. It granted legal recognition to the Lutheran Church and allowed princes to adopt Lutheranism as the state religion, meaning the inhabitants were expected to follow the same religion as their ruler. However, it did not recognize other Protestant denominations and was limited in scope, leaving many conflicts unresolved which contributed to further wars of religion, such as the Thirty Years' War.