Letter of Credit was quite literally that - a letter addressed by the buyer's bank to the seller's bank stating that they could vouch for their customer, the buyer, and that they would pay the seller in case of the buyer's default.  

Nowadays, they are formatted to provide fill-in spaces for the various requirements of international or domestic business.  It is written by a bank on behalf of one of it's creditworthy customer, who's application for the line of credit has been approved. Or have facilities, or whatever.

The sequence of information on Letter of Credit the language used is determined by rules set by the INTERNATIONAL CHAMBER OF COMMERCE (ICC).  The rules and language are very specific and cannot be changed, and are spelled out in the ICC's Uniform Customs and Practice for Documentary Credits.

The parties to a Letter of Credit are 

The Buyer  (the applicant)

The buyer's bank (the issuer)

The beneficiary (the seller/payee)

The beneficiary's bank.  

The LC outlines the conditions under which payment will be made to a third party (the beneficiary).  The conditions are specified by the buyer and may include insurance forms, Way Bills, Bills of Lading, Customs forms, and various certificates . It is the responsibility of the issuing bank to ensure, on behalf of its client the buyer, that all documentary conditions have been met before the Letter of Credit funds are released.

In effect, a basic Letter of Credit is a financial contract between the bank, the bank's customer, and the beneficiary, and this contract  -   involves the transfer of goods or services against funds. 

Not to be confused with the contract between the buyer and seller.  The neither of the banks have any interest in that kind of contract.

The Letter of Credit may be written for a short period of time, covering one shipment of goods, or may be written for a greater amount and for a longer period of time in order to cover say, a year's worth of shipments

Make sure there are FAKE Letters of creidts too, you should be careful of this and you should  Note: a valid Letter of Credit never carries the term "one year and one day" which is a meaningless term created by scammers. Please read what I posted about new generation fo scammers in this section>

The maturity date on a Letter of Credit is the date on which the full value of the credit is payable.  

A Letter of Credit may have a discount rate.  That means that the buyer may not have been the one to close the deal with seller.  Perhaps it was arranged by a licensed broker, the buyer's agent, or perhaps the importer's bank acting as the buyer's agent.  

In any event, the buyer has to either have the funds on deposit in his bank to cover the full value, or has to have made other arrangements with his bank to cover the full value.  A Letter of Credit cannot be purchased for only a small percentage of the face value and then cashed across the street for the full face value.