Warning: if you're more scared of It Chapter Two spoilers than you are of Pennywise the clown, don't read ahead!
The members of the Losers Club are back together in Derry, ME, after a long 27 years — and so is Pennywise the clown — and they're all back with a vengeance. Over the years, all of the Losers have left Derry and have forgotten about what bonded them together in the first place. That is, except for Mike, who never left Derry and since has spent all of his time reading about the history of the town he and his friends grew up in. With this reading comes researching how to defeat Pennywise once and for all. Enter: the Ritual of Chüd.
The film's mention of the ritual is a little more realistic than that of Stephen King's novel, where he writes of a multidimensional world, an interdimensional turtle, and a pretty weird scene between the boys and Bev, but it's still pretty bizarre. We don't really see any of those elements in 2017's It, nor do we see them in It Chapter Two, but instead the ritual is incorporated in a new way.
Since Mike has spent years obsessing over how the Losers can defeat It, he knows exactly what he and the Losers have to do when the time finally comes. Mike shows Bill an ancient artefact that he stole from the tribe of Shokopiwah, the original people of Derry, who have since migrated to the outskirts of the town where they're safe from Pennywise. Upon doing this, Mike drugs Bill with a small dose of a Shokopiwah herb that results in Bill seeing what happened in the past. The vision includes the Shokopiwah people holding hands unified in a circle as a demonic-like bird dives down to attack them, as well as a fire with three glowing orbs, otherwise known as the deadlights, hovering above it.
Bill and Mike understand that in order to defeat It, they must make the group split up so that each member of the Losers can gather their own artifact in order to remember what happened to them in Derry and why their lives have been changed forever. The group goes on their own individual adventures, forcing themselves to remember things that they would much rather forget. Once these artefacts are found and their memories are confronted, the group unites and travels to the innermost sanctuary of the Well House, where Pennywise dwells. Once there, the Losers burn their objects, symbolising their accomplishment in overcoming their pasts and recognising that they can move forward together.
But, the burning of the artefacts isn't enough to kill Pennywise off, and the Losers quickly realise that Mike has been lying to them all along. Mike tries to make the Losers believe in the ritual because he knows that in order to defeat It, they have to be united. Though the Shokopiwah failed the Losers in one way, they helped them in another, reminding them that they were in this battle together — both in childhood and in adulthood. Once the Losers stand together and believe that they can defeat It, Pennywise doesn't stand a chance.