A chain reaction is a sequence of reactions where a reactive product or by-product causes additional reactions to take place. In a chain reaction, positive feedback leads to a self-amplifying chain of events.
Chain reactions are one way in which systems which are in thermodynamic non-equilibrium can release energy or increase entropy in order to reach a state of higher entropy. For example, a system may not be able to reach a lower energy state by releasing energy into the environment, because it is hindered or prevented in some way from taking the path that will result in the energy release. If a reaction results in a small energy release making way for more energy releases in an expanding chain, then the system will typically collapse explosively until much or all of the stored energy has been released.
A macroscopic metaphor for chain reactions is thus a snowball causing a larger snowball until finally an avalanche results ("snowball effect"). This is a result of stored gravitational potential energy seeking a path of release over friction. Chemically, the equivalent to a snow avalanche is a spark causing a forest fire. In nuclear physics, a single stray neutron can result in a prompt critical event, which may finally be energetic enough for a nuclear reactor meltdown or (in a bomb) a nuclear explosion.
In 1913, the German chemist Max Bodenstein first put forth the idea of chemical chain reactions. If two molecules react, not only molecules of the final reaction products are formed, but also some unstable molecules which can further react with the parent molecules with a far larger probability than the initial reactants (In the new reaction, further unstable molecules are formed besides the stable products, and so on ..).
In 1918, Walther Nernst proposed that the reaction between hydrogen and chlorine is a chain reaction in order to explain what's known as the quantum yield phenomena. This means that one photon of light is responsible for the formation of as many as 106 molecules of the product HCl. Nernst suggested that the photon dissociates a Cl2 molecule into two Cl atoms which each initiate a long chain of reaction steps forming HCl.