We review the formalism of the effective average action in quantum fie
ld theory which corresponds to a coarse grained free energy in statist
ical mechanics. The associated exact renormalization group equation an
d possible nonperturbative approximations for its solution are discuss
ed. This is applied to QCD where one observes the consecutive emergenc
e of mesonic bound states and spontaneous chiral symmetry breaking as
the coarse graining scale is lowered. We finally present a study of th
e chiral phase transition in two flavor QCD. A precision estimate of t
he universal critical equation of state for the three-dimensional O(4)
Heisenberg model is presented. We explicitly connect the O(4) univers
al behavior near the critical temperature and zero quark mass with the
physics at zero temperature and a realistic pion mass. For realistic
quark masses the pion correlation length near T-c turns out to be smal
ler than its zero temperature value.