Over the history of Albion there have been many religions, most of them being direct opposites to each other. The two largest deities of Fable were Avo and Skorm. Avo was a benevolent god who accepted donations of gold, while Skorm was an evil god, who accepted human sacrifices. The two gods are actually fake, as revealed by the Oracle.
After the destruction of the Heroes Guild and during the Decade of Knowledgification, the two churches disbanded and the people of Albion stopped pinning the forces of nature on gods and sought to find scientific explanations. However, it didn't stay that way.
Not long after the dissolution of the Chapel of Skorm, the Temple of Shadows was formed within a ruined cathedral. The group is mostly formed from rich folk who see evil as nothing more than a hobby, but the forces they worship are much more real than Skorm. The sacrifices they make range from demented, to reversing someone's sex, to turning them into chickens, or to pure evil (such as turning someone into a living Shadow). The group works on a weekly schedule, with events such as Torture Tuesday, and Poker Night Friday.
On the other side of the spectrum however, is the Temple of Light. A lone missionary went on a desperate pilgrimage, and decided to wander into to a dark cave, expecting to find nothing. However, the man did find something. He found the Wellspring of Light. Using the pure waters from the cave, a golden acorn was planted and from that came the Golden Oak, a tree that makes all the surrounding lands fertile for a few decades before producing another acorn and dying. The man, now known as Albert the Luminous, founded the Temple of Light and from the Golden Oak, the small farming community of Oakfield is born.
Other religions also exist. There is a sect known as the Chasm that believes that one day the world will be consumed be a great chasm, and true believes like themselves will reign supreme. The Chieftain of Knothole Island also makes reference to some unnamed gods "you must have angered the Gods. Because they haven't stopped spitting at us since you left." There are also a few references to Hell in-game, as in "what the Hell are you doing?". Also, in Fable II there are several statues found throughout the countryside, and inside old ruins. The ones found in the wilderness often seem to have an offering of wine and sometimes food.