Here are the rules, compliments of Mark Movsesian at the Center for Law and Religion at St. John's University in New York.
It just shows you. Even an institution as ancient and traditional as
the papacy still retains the ability to shock. Pope Benedict’s announcement
today that he will resign for health reasons, effective February 28,
seems to have taken everyone, including Vatican insiders, by surprise.
It is the first papal resignation since the year 1415.
Canon law on papal resignation is surprisingly – or, come to think of it, unsurprisingly – brief. Canon 332(2) of the current Code of Canon Law
provides simply that “ If it happens that the Roman Pontiff resigns his office, it is required for validity that
the resignation is made freely and properly manifested but not that it
is accepted by anyone.” A leading commentary
notes that Canon 332(2) does not specify the person or persons to whom a
pope must manifest his resignation. Some scholars argue that the
college of cardinals, as the body that elects the pope, is the proper
recipient. But that’s not entirely clear; anyway, in Catholic
understanding, the pope has authority to determine such matters for
himself. Most likely, today’s announcement at a consistory, in which the
Pope stressed that he was taking this step voluntarily and in full
recognition of its gravity, will suffice. Anyway, the college of
cardinals will no doubt have a chance to receive the resignation, if
that action is required, before it elects Pope Benedict’s successor,
most likely next month.
"First Thoughts" blog has some good coverage of Benedict's resignation here and here and here and here and here and here.

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