Short answers, pulled from the story.
Transfer of merit represents a Buddhist spiritual discipline where a practitioner's merit from good deeds moves to deceased relatives or all sentient beings. The word transfer does not render any term from classical Buddhist languages accurately, as terms like pariñāmanā mean change, alternation, ripening, bringing to maturity, development, or diversion.
Indologist Heinz Bechert dated the fully developed form of the Buddhist doctrine of transfer of merit to the period between the fifth and seventh century CE. Some scholars believe the idea originates with early Buddhism, whereas others suspect a later origin, with Richard Gombrich placing origins around the fourth century BCE instead.
Belief holds that recipients can receive this merit if they rejoice in the meritorious acts of the person transferring it. Monastics in countries like Burma and Sri Lanka explain deceased gain merit through simply rejoicing in relatives' merits, maintaining no real transference occurs but deceased make merit themselves following orthodox doctrine.
A second origin lies in Pitru ancestor worship traditions preceding Buddhism, where death required transformation from wandering preta to blissful pitri state through complex śrāddha ceremonies. The Petavatthu text describes transferring merit to deceased relatives in detail, and the word preta refers to one's dead relatives in context of merit transfer.
Scholars argue the practice may have developed due to influence of Mahayana Buddhism where bodhisattvas share merit with devotees. This created what was called the inexhaustible store of merit, allowing celestial Buddhas to transfer merits to devotees without decrease while expressing Buddhist ideals of compassion and emptiness.