Ransom is a payment made by a defeated warrior to the one who defeated him, usually in exchange for his life. In medieval Europe there were two main sources of ransom, on the tourney-field and on the battle-field, and the application of ransoms was somewhat different.
The convention of ransom was so ingrained in the medieval mindset that exceptions to it were outrageous: At Agincourt many minor nobles were executed rather than taken captive and only the very wealthy were spared, which caused a furor across Europe.
Ransoms were an important aspect of tourneys, as there were very few purses for the victors. Instead, the vanquished would have to give up their weapons, armor and mount (or the cost thereof) to the man who defeated them.
As only knights and other gentleman were allowed to participate in tourneys the custom of ransom was not applicable to the lower classes.
The conventions of ransom were central to feudal European warfare. An armigerous warrior of whatever rank could, if he survived the initial fighting, be confident that his life would be spared in exchange for ransom. The greater the status of the prisoner, the greater the ransom he could be expected to bring. A prisoner would sometimes be held by the victor (especially if very valuable) until his relatives or vassals sent enough money to free him; sometime the prisoner released on parole to raise the promised funds.
Unlike tourneys, the arms and armour of the vanquished were usually not sufficient to pay the ransom -- in this case monetary compensation was due. Another major difference from tourneys was that men from all classes of society were on the battlefield. For a common soldier (or even a poor knight or noble) capturing a valuable prisoner could be compared to winning the modern lottery; the enormous expense of arms and armour could keep a poor man alive for years -- perhaps the rest of his life.
The medieval convention was simple: a common soldier was allowed to keep 2/3 of the ransom for himself and gave 1/3 to his captain. The captain would give 1/3 of his share to the commander. The commander, in turn, would give 1/3 of his share to his sovereign.
Unfortunately, the common solider was effectively valueless as a source of ransom. Common prisoners had little hope that their lives would be spared for money -- often they were put to death or sold into slavery.
Ransoms in the SCA
While forcing players and volunteers to give up the price of a new suit of armour is impractical, the SCA tries to recreate the custom of ransom in various ways.
One is a special tournament scenario where every combatant is given a ransom value and a starting 'fund' (commonly chocolate coins). If a fighter is defeated during the melee, then they must pay their worth in ransom to the victor/s. When the fund can no longer pay a ransom amount, then the fighter must withdraw from the melee.
The ransom value varies according to the rank and positions held by each fighter. Accordingly, royal peers are worth more than other peers, who are worth more than other fighters. There is a ransom melee each year at the William Marshall tourney in Stormhold.