Summary: Forgiveness is not an option for the Christian, it is a command. There are good and bad consequences when we forgive, and when we fail to forgive.
Jesus had just given some detailed instructions about how to deal with a person who does you wrong. In v18, He says that heaven will back the person up who follows these instructions.
This brought a question to the disciples' minds, and as usually was the case, Peter was the spokesman for them, and he asked Jesus how many times a person had to be forgiven, before you just mark them off your list. Peter asked, "Am I supposed to forgive him seven times?" I suspect that sounded like an unreasonable amount to Peter. In the natural way of thinking, if you forgive somebody a couple of times, and they turn around and do the same thing again, well you've done all you can do. But look what Jesus said in v22: "Seventy times seven!" What do you think Peter and the others thought when Jesus said that? They probably had a look on their faces that showed what they thought. So, as Jesus often did, he told them a story, a parable to make His point, and to show that this really wasn't an unreasonable thing, at all.
A man had a servant who owed him a lot of money, and when it came time to pay, the servant could not pay. In those days, the creditor could have the person put into a debtor's prison, where he would not only suffer hardship, but he would work, and the pay would go to the creditor. Not only that, if the debtor had a family, his family could be sold into slavery to help satisfy the debt. This man, to whom the debt was owed, had the right to do every bit of that, yet Jesus said that he didn't do it, because he was moved with compassion. He didn't even say, "I'll give you more time to pay it," which is what the man asked for in verse 26, because it was obvious that it was a debt he was never going to be able to pay. This good and compassionate man forgave the debt. He just marked it paid and let the man go free. That doesn't mean that nobody paid it, but it means that the man to whom the money was owed paid it.
If the story ended right there, it would be a very happy ending for the man who owed the money and couldn't pay. But it doesn't end right there, there's more. This same man went out and saw a fellow servant who owed him some money, which was a very small amount, an amount that didn't even compare to what he had owed his master, and he demanded that the man pay him, and that he pay him now. Verse 28 says that he got physical with him, taking him by the throat saying, "I want my money."
In verse 29, this man, who owed him the money, did the exact same thing that he, himself, had done concerning his own debt. He begged for more time and for mercy. Yet, he acted completely differently with this man who owed him money, than his master had acted toward him. Verse 30 tells us that he had him cast into prison.
Then, Jesus delivered the point of the story: word came to the man who had forgiven the debt of his servant, that the servant had acted so unkindly toward to his fellow servant, who was also a servant of this master, and he called the man back in, told him that he was a wicked servant, and cast him into prison. Then, Jesus said, in verse 35, "This is exactly what my Heavenly Father will do to you, if you fail to forgive."