Limbo has referred to two states of existence. The first was as a temporary place of rest for righteous souls who died before heaven was opened to them by Christ's Ascension. Once there was no need for such an intermediate state because of the opening of heaven to man, that state ceased to exist.
The second understanding of limbo was a theological speculation only. It was an attempt by Christian theologians to simultaneously affirm that sanctifying grace is absolutely necessary for entry into heaven and that baptism is the normative means that sanctifying grace is imparted to individuals. If baptism is the means by which human beings receive sanctifying grace, it was assumed that those who, through no fault of their own, died without baptism, could not enter heaven. But if they had not committed personal sin because they were incapable of personal sin, such as babies, then they also could not go to hell because hell is for the punishment of those who deliberately choose not to repent their mortal sins. Limbo, then, was considered a place of perfect natural happiness that lacked only the immediate presence of God (i.e., the beatific vision).
Because this understanding of limbo was merely an attempt by theologians to understand Christian doctrine and was never itself Christian doctrine, such an understanding can be either accepted or rejected by the Church. Recently there has been an investigation into whether the speculation of limbo should be accepted or rejected, and it appears that, should such a decision be made, the decision may be to reject the speculation. If so, it would be because the Church now more fully understands that God is not bound by the sacraments he instituted and can impart sanctifying grace outside of the sacraments in circumstances that warrant him doing so. The Church currently entrusts the fate of unbaptized babies to the mercy of God and does not presume to state that God cannot make provision for their entry into heaven.
The Lord himself affirms that baptism is necessary for salvation. He also commands his disciples to proclaim the gospel to all nations and to baptize them. Baptism is necessary for salvation for those to whom the gospel has been proclaimed and who have had the possibility of asking for this sacrament. The Church does not know of any means other than baptism that assures entry into eternal beatitude; this is why she takes care not to neglect the mission she has received from the Lord to see that all who can be baptized are "reborn of water and the Spirit." God has bound salvation to the sacrament of baptism, but he himself is not bound by his sacraments (CCC 1257, emphasis in original).
As regards children who have died without baptism, the Church can only entrust them to the mercy of God, as she does in her funeral rites for them. Indeed, the great mercy of God who desires that all men should be saved, and Jesus' tenderness toward children which caused him to say: "Let the children come to me, do not hinder them," allow us to hope that there is a way of salvation for children who have died without baptism. All the more urgent is the Church's call not to prevent little children coming to Christ through the gift of holy baptism (CCC 1261).
- from the original Catholic Encyclopedia
Limbo In Limbo
by Jimmy Akin