In Genesis 22, we read that God commands Abraham to offer up his only son Isaac upon an altar. Abraham, together with Isaac, makes the journey to Mount Moriah. There he binds his apparently uncomplaining son upon the wood, raising his knife to slay him as though he were an animal sacrifice. But at the last moment, an angel calls out to Abraham to stay his hand and not kill his son. At that moment God commends Abraham for his willingness to obey Him even to the point of giving up his son, then provides a ram for the actual sacrifice.

This story has been elaborated in Jewish lore with a multitude of moral applications. At times, Isaac has served as the symbol of Jewish martyrs. In other contexts, the account has been used to demonstrate that God does not require a human sacrifice. Even the sounding of the shofar on Rosh Hashanah is said to be based on the Akedah.

One of the most intriguing commentaries on the Akedah sees the sacrifice as actually having been consummated, and as effecting atonement for Israel in the same manner as animal sacrifices:

There was...a remarkable tradition that insisted that Abraham completed the sacrifice and that afterward Isaac was miraculously revived.... According to this haggadah, Abraham slew his son, burnt his victim, and the ashes remain as a stored-up merit and atonement for Israel in all generations ....
The Torah: A Modern Commentary (UAHC, 1981), p. 151, n.5

It appears that this notion was widespread in medieval times:

Ibn Ezra (commentary on Gen. 22:19) also quotes an opinion that Abraham actually did kill Isaac...and he was later resurrected from the dead. Ibn Ezra rejects this as completely contrary to the biblical text. Shalom Spiegel has demonstrated, however, that such views enjoyed a wide circulation and occasionally found expression in medieval writings.
Encyclopedia Judaica, 2:482, Akedah" ?1972

The idea of Isaac's dying as an atonement on the altar actually precedes medieval times in some rabbinic writings. One can find a variety of such passages:

'A bundle of myrrh (kofer) is my well-beloved' (Cant. I, 14). This refers to Isaac, who was tied up like a bundle upon the altar. Kofer, because he atones for the sins of Israel.
Cant. R. I, Sec 14,I, on I, 14; f. 12b

If then Isaac's descendants fall into sin and evil deeds, do thou make mention of the binding of Isaac, and get up from the throne of judgment, and sit down upon the throne of compassion, and be filled with pity, and turn the attribute of judgement into the attribute of mercy.
Lev.R. 29:9

R. Judah says: When the sword touched Isaac's throat his soul flew clean out of him. And when He let his voice be heard from between the two cherubim, 'Lay not thy hand upon the lad, 'the lad's soul returned to his body. Then his father unbound him, and Isaac rose, knowing that in this way the dead would come back to life in the future; whereupon he began to recite, Blessed art Thou, O Lord, who quickens the dead.
Pirkei de-Rav Eliezer 31

When Father Isaac was bound on the altar and reduced to ashes and his sacrificial dust was cast onto Mount Moriah...
Shibbole ha-Leket

How did this idea ever get started, especially considering that in the Genesis account we are specifically told that Isaac did not die? No one is sure, but some surmise that it arose in reaction to Christian teaching. Otherwise, the sacrifice of Isaac would be less effective than that of Yeshua. The parallel between these stories and the death and resurrection of Jesus is obvious. Others speculate that the story is a reflection of medieval Jewish life, when Isaac served as a model for those who would kill their children and themselves rather than submit to forced conversions and torture.

It is interesting that believers in Yeshua found parallels between these two Jews long before medieval times. The story of the Akedah has been seen as a graphic picture of a greater Akedah which occurred some 1800 years after Abraham and Isaac. 

And He said, "Take now your son, your only son, whom you love, Isaac, and go to the land of Moriah; and offer him there as a burnt offering on one of the mountains of which I will tell you." Genesis 22:2

For God so loved the world, that He gave His only begotten Son, that whoever believes in Him should not perish, but have eternal life. John 3:16

And walk in love, just as Messiah also loved you, and gave Himself up for us, an offering and a sacrifice to God as a fragrant aroma. Ephesians 5:2

Abraham so loved God that he was willing to offer up his only son as a sacrifice. And Isaac--is it because he too loved God and his father that he did not complain but willingly went to the altar?

More than Abraham loved God, God loves us. More than Isaac was willing, Jesus willingly submitted to die as an atoning sacrifice for us, so that we might be reconciled in peace to God.