Massive retaliation was a foreign policy most associated with Dwight D. Eisenhower and his administration in the United States in the 1950s. The basic idea behind massive retaliation was that the U.S. reserved the right to respond to even what seemed to be relatively inconsequential foreign policy challenges from the Communist countries by quickly escalating to the massive use of nuclear weapons. By making this somewhat irrational threat, the administration hoped that the Soviet Union and China would be deterred from ever actually doing anything that forced the U.S. to implement it.
There were a number of rationales behind the policy, the first being that the U.S. enjoyed a relative superiority of nuclear weapons in the early days of the Cold War and hence could get away with making the threat. One of the others was budgetary - the policy was an attempt to square the new global responsibility to defend non-Communist countries that America had taken on with fiscal conservatism. Nuclear weapons seemed an ingenious technical solution to the problem of warfare, one that didn't require expensive standing land armies and hence promised the illusion of security on the cheap - not unlike today's Predator drones.
In the early days of the Cold War, U.S. security commitments had proliferated and an expensive military establishment had been built up to fight the Korean War. Eisenhower - whose farewell address was the most eloquent harangue against the military-industrial complex ever delivered from the presidential pulpit - didn't believe that the U.S. could take the social or economic strain of fighting endless wars across the world, and so saw nuclear weapons, or at least the threat of them, as an alternative. This seemed to promise a continuation of the responsibility to defend against the Communists that early Cold Warriors took for granted without committing the American people to endless overseas bloodshed. But it also committed the world to endless nuclear brinkmanship.
The way the doctrine worked can be illustrated by what became known as the First Taiwan Straits Crisis of 1954 - 5. The Chinese Civil War had ended in 1949 with the Communists victorious, and Chinese nationalists fled to Taiwan to nurture their futile dreams of reconquering the mainland and, eventually, to build an industrial powerhouse. But back in these early heady days of the Cold War they were much more focused on the former than the latter, and in 1954 they began to build up military forces on Quemoy and Matsu, two islands close to the mainland. When the Communists threatened war in response, the U.S. threatened massive retaliation, and Mao Zedong backed down. Peace, seemingly, had been secured by the atomic stick.
Things weren't as simple as they appeared, as critics from both the right (Henry Kissinger, in his first book, was among them) and the left pointed out. For a start, it seemed to make little sense to threaten to blow up the world over a tiny island off the coast of China. So long as the deterrent worked, it was all very well - but would the U.S. seriously obliterate mainland China if it didn't? The risk arose that either it would have to, which would be obviously disproportionate, or that it would soon become apparent that actually the U.S. had no intention of responding to minor "nibbles" by its enemies with a nuclear holocaust - and so the deterrent would no longer be credible, and the nibbles could continue regardless.
Another problem was the opportunities that the doctrine gave to allies to bring about nuclear war. The Eisenhower administration thought that the Chinese nationalists had been stupid to deploy troops to Quemoy and Matsu in the first place, but felt obliged to defend them once they were there. Similarly, the administration had threatened massive retaliation if the armistice that ended the Korean War broke down - but this breakdown could just as easily be precipitated by South Korea's bellicose leader as by North Korea. Again, if the only means of backing up these adventurous allies was through general nuclear war or doing nothing, the doctrine seemed to have failed.
When John F. Kennedy came to power in 1961, he called for the end of the doctrine of massive retaliation and replaced it with what was called flexible response. Believing that government spending could stimulate and grow the economy and hence not so concerned about balancing the budget, Kennedy called for the U.S. to develop a range of more expensive tools which would allow a response to foreign policy challenges at many levels rather than resorting to massive retaliation. Part of the rationale for this was to respond to the rise of Communist guerrilla movements around the world, which Kennedy argued had been allowed to flourish because the Eisenhower administration - mercifully unwilling to nuke them - had no effective response. Thus, in an example of the endless tragedy which history presents to us of reactions to excesses leading to their own excesses, were U.S. forces set on course to fight a futile land war in Asia soon thereafter.