The following is taken from religioustattoos.net:

Chi (C) and Rho (R) are the first two letters of the Greek word Christ (CRISTOS).

Early Christians, through fear of persecution, devised the secret symbol as a means of recognition. In the 4th Century, on the eve of a battle, the Roman Emporer Constantine saw the Chi Rho in the stars and viewed its appearance as an omen. He ordered his army to emblazon their standards with the symbol. The next day, Constantine defeated Maxentius in battle. In thanksgiving, Constantine rescinded the ban on Christianity in the Roman Empire.

Chi (C) and Rho (R) are the first two letters of the Greek word Christ (CRISTOS).