I copied and pasted this from an older post I wrote on Friday, November 19, 2010.. Enjoy!
lets really look at the major scale, and all the chords that can be made by strictly adhering to the notes that make up the scale. this is a good foundation for understanding what chords are used in tunes, and why. also, this is a great start for someone learning how to read/play music on any instrument, as well as those who are just looking for some compositional ideas to get further into harmony.
first, i think it would be helpful to look at and define the 4 types of chords we will encounter while using the notes from the major scale...
the major 7th chord - in the key of C, lets take the chord made from the notes C E G B. lets look at the basic triad that is there, the C E G. that is a C major triad and we have a B on top of that. the C is the 1 (or tonic) the E is the major 3rd, the G is the 5th and the B is a major 7th... we call this chord a C major 7th chord or Cmaj7.
the dominant 7th chord - if we look at the chord made from the notes C E G Bb, we still have the C major triad, but now we have a Bb on the top which is a flat 7th. this chord is called C7.
the minor 7th chord - lets look at what happens if we change the E to Eb. we would have the chord C Eb G Bb. here we have C Eb G which is a minor triad with the Bb on the top. this gives us a C minor 7th chord, or Cmin7.
the minor 7th flat 5 chord - the last chord we will find in this process is made using the notes C Eb Gb Bb. again, C is the 1 and we have Eb as the minor 3rd again. also now we have Gb as the flat 5th and Bb as the flat 7th on the top. we can call this chord C minor 7th with a flattened 5th like this: Cmin7(b5). this can also be called C half-diminished 7th, but we will get into that later.
here are the possible chords built on all the notes of the C major scale...
C E G B = Cmaj7 = I
D F A C = Dmin7 = ii
E G B D = Emin7 = iii
F A C E = Fmaj7 = IV
G B D F = G7 = V
A C E G = Amin7 = vi
B D F A = Bmin7(b5) = vii
we find the chords contained in the C major scale by starting at the tonic note (the C) and building a 4 note chord, skipping every other note. then go to the 2nd note (the D) and do the same... and so on until we reach the last one, the B. notice that each chord has a roman numeral associated with it. the uppercase roman numerals are for major and the lowercase ones for minor. if i want to say to you 'play a ii V I chord progression', no matter what key your in, you'll be able to find the ii V I. for example, in the key of F, Fmaj7 is the I chord Gmin7 is the ii chord and C7 is the V chord.
what i want you to notice is the V (five chord). we call that a dominant chord. note how there is only one of these in the list. this is handy because the tendency of that V chord is to want to move or resolve to the I chord. if you are in the key of Bb and you want to change keys to the key of C, a quick and easy way to help make that happen is by playing or writing a G7 chord. probably 90% of the time you see a 7th chord, its role is being a dominant chord strongly resolving or wanting to resolve to its I chord or tonic. this can help you determine the key of a tune or find your way tonally through a tricky section.
notice also that there is only one minor 7th flat 5 chord. next time, we'll get into its role and where we can usually find them. try and write out the chords from other major scales.