To be holy means to be set aside or distinguised for a special purpose. E.g., I have certain pants that I only wear to mow the lawn. That's what makes them special. Although the pants have grass stains on them, I see them as being perfect for what they're designed to do. Likewise, for me to be holy means that God has put me aside for a special purpose. Moreover, He sees me as being blameless [through Christ] for what He's called me to do. Though everyone else can see my "grass stains," God sees me as being just what He needs to do His will.
/kbb