  We review the formalism of the effective average action in quantum field
theory which corresponds to a coarse grained free energy in statistical
mechanics. The associated exact renormalization group equation and possible
nonperturbative approximations for its solution are discussed. This is applied
to QCD where one observes the consecutive emergence of mesonic bound states and
spontaneous chiral symmetry breaking as the coarse graining scale is lowered.
We finally present a study of the phenomenological importance of
non--renormalizable terms in the effective linear meson model.
