Challenge Grants:

1. Spotlight the recipient organization and provide an endorsement from a well-known entity.
2. Help other donors feel that their money goes farther.
3. Enable the recipient to honor and reward the entity that issued the challenge grant. ^[2]

A typical requirement is similar to matching funds where funds be raised or acquired from other sources following a stated matching factor, often 2:1, 3:1 or 4:1. For example, a $1,000 challenge grant with a 3:1 match would require the recipient to raise $3,000 before they would receive the $1,000 grant. The challenge could require a new solution to an existing problem that had been ignored.^[3] There could be additional requirements specified that could be virtually anything, from program certification to member participation.

http://en.wikipedia.org/wiki/Challenge_grant