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The short answer is that prayer can help shorten the time someone spends in Purgatory, but, as was pointed out, funerals predated Christianity so it would be incorrect to state that funerals will help shorten the time, in part, because funerals are a way for those that survive to reflect on and to have closure over the loss of a loved one.
In the Catechism of the Catholic Church you find this:
1032 This teaching is also based on the practice of prayer for the dead, already mentioned in Sacred Scripture: "Therefore [Judas Maccabeus] made atonement for the dead, that they might be delivered from their sin."609 From the beginning the Church has honored the memory of the dead and offered prayers in suffrage for them, above all the Eucharistic sacrifice, so that, thus purified, they may attain the beatific vision of God.610 The Church also commends almsgiving, indulgences, and works of penance undertaken on behalf of the dead:
Let us help and commemorate them. If Job's sons were purified by their father's sacrifice, why would we doubt that our offerings for the dead bring them some consolation? Let us not hesitate to help those who have died and to offer our prayers for them.611
Scripturally you can look at 2 Maccabees 12, and you may want to read some part of the last section of this chapter for context, but at verse 46 is this:
46 It is therefore a holy and wholesome thought to pray for the dead, that they may be loosed from sins.
We also have Job 1:5
5 When a period of feasting had run its course, Job would make arrangements for them to be purified. Early in the morning he would sacrifice a burnt offering for each of them, thinking, βPerhaps my children have sinned and cursed God in their hearts.β This was Jobβs regular custom.
In the RCC those that have died before us are still part of our church, and much as Job made sacrifices to help purify his children, and much as prayers for the dead help them, we continue this tradition to help shorten the time people spend in Purgatory, as you cannot enter the gates of Heaven with any stain on your soul, so if you did not die perfectly in grace, you spend time being purified, then enter Heaven.
Now, this is different than worshiping the dead. Not all prayer is worship, prayer can also just be a way to talk with someone that you care about that isn't with you, for example. True worship should only be for God. This is often a point of confusion for non-catholics.
For more on this you can look at: http://catholicism.about.com/od/thesaints/f/Pray_to_Saints.htm
And for some quotes from early church fathers, and more explanation you can look at: http://www.catholicapologetics.org/ap070600.htm
For those that want to argue about the validity of 2 Maccabees you may want to read this first to see what the early church fathers taught about the OT canon, for example that it was quoted by Cyprian of Carthage.
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Catholic funerals invoke powerful prayers for the dead. Other funerals may do so as well, and are potent inasmuch as they incorporate prayer to the Lord Most High.
Prayer is profitable for the souls of the dead in Purgatory, but to say that it 'shortens the time' one spends there is misleading at best. Medieval Catholicism would be rightly understood as saying that prayer and indulgence shortens the aeviternity in purgatory, and modern Catholic thought would agree with this (as would pre-medieval catholic thought, and pre-catholic way-ist thought, and pre-christian Abrahamic thought), but the word 'aeviternity' looks like gibberish to many readers. For modern Christians, it would be no less accurate and much less misleading to say that prayer lessens the suffering endured in Purgatory.
Additional Reading:
EWTN article
Decent Orthodox overview of the topic
New Advent entry
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Seeing as how I'm not Catholic I know very little of Purgatory, but on the case of burial it predates modern times by quite a few centuries
You can read more about it at this link.
http://en.wikipedia.org/wiki/Christian_burial
Probably the earliest detailed account of funeral ceremonial which has been preserved to us is to be found in the Spanish Ordinals of the latter part of the seventh century. Recorded in the writing is a description of "the Order of what the clerics of any city ought to do when their bishop falls into a mortal sickness." It details the steps of ringing church bells, reciting psalms, and cleaning and dressing the body.