Tzedakah literally means justice or righteousness. It is usually translated, somewhat inaccurately, according to Rabbi Joseph Telushkin, as charity. But we believe charity is one important way that we can pursue justice.
Professor Reuven Kimelman wrote in Tzedakah and Us, that, "Tzedakah may not save us, but it makes us worth saving." And it's true, contributing to the well being of others is at the center of the Jewish being.
It's as easy as 1, 2, 3.
The Talmud describes the different levels of tzedakah and Rambam organized them into a list. The levels of charity, from the least meritorious to the most meritorious, are:
Giving less than you should, but giving it cheerfully.
Giving after being asked.
Giving before being asked.
Giving when you do not know the recipient's identity, but the recipient knows your identity.
Giving when you know the recipient's identity, but the recipient doesn't know your identity.
Giving when neither party knows the other identity.
Enabling the recipient to become self-reliant.