In the context of patient-therapist setting, transference refers to redirection of the patient's feelings from a significant person in their life to the therapist. Counter-transference is defined as redirection of the therapist's feelings toward the patient, or more generally as the therapist's emotional involvement with the patient.
Transference was first described by Freud, who acknowledged its importance for Psychoanalysis for better understanding of the patient's feelings experienced during childhood. Transference is often manifested as an erotic attraction towards the therapist, but it's also common for patients to transfer feelings from their parents or children. The latter may be a problem when treating elderly patients.
Transference and counter-transference are often characterized as useful tools for building trust between the patient and the therapist. On the other hand, counter-transference could interfere with the therapist’s ability to understand the patient and may adversely affect the treatment.
In The Psychology of the Transference, Carl Jung states that within the transference Dyad both participants typically experience a variety of opposites, and that in Love and in psychological growth, the key to success is the ability to endure the tension of the opposites without abandoning the process; and that in essence it is that tension that allows one to grow and to transform.
In everyday life, transference is a fairly common phenomenon. One deals with people in one's life with the stereotypes one develops in the course of one's life. Only in the personally or socially harmful context can transference be described as a pathological issue.