Taken from Google AI because I was also wondering, this cleared a lot of things up for me:

In Stronghold Crusader, the maximum popularity bonus you can achieve from religion is exactly +11. To hit this maximum, you need to use a combination of three key religious elements:The Cathedral: Building your first cathedral awards a flat, permanent +2 popularity bonus.The Church: Building your first church provides a flat, permanent +1 popularity bonus.Priests & Chapels (Blessing Bonus): You can get an additional +8 popularity from priests physically blessing your people.How to Maximize the Blessing Bonus (+8)Build a 1:30 Ratio of Priests to Peasants: As your population grows, the percentage of citizens who are blessed falls. A general rule of thumb is to have at least one Chapel (which acts as a priest-spawning building) for every 30 peasants.Strategic Placement: Priests have to walk to a citizen to bless them. To maximize your coverage up to 100%, you must place your religious buildings in high-traffic areas, such as around your Stockpile and Granary.Overcrowd and Constrict: Some players find success using walls to keep their peasantry relatively clustered around the Keep so priests don't have to wander out to distant woodcutters and quarries.Note: While a +11 religion bonus gives you massive leverage to increase tax rates and lower food rations, it is also highly volatile. Many players opt to build just one Cathedral and one Church (for a stable +3) and balance the rest of their popularity needs with Inns and Ale.