“You are Holy, and Your name is holy.”
We begin this blessing by proclaiming G-d as holy. What does this mean?
It is written in Psalms, “G-d is high above all nations, His glory is (even) above the heavens (113:4).” Thus, when we praise G-d as holy we are saying that His essence is totally beyond all of the worlds that He created, including the most sublime heavenly realms.
However, although G-d remains forever beyond the grasp of creation, at the same time He reaches out from above, making Himself present in both the upper spiritual worlds as well as in this world. This is the meaning of the verse, “Who is like the Lord our G-d, Who dwells on high (above the heavens, yet) lowers Himself to see (i.e. govern) upon heaven and earth (Psalms 113:5-6).”
According to the above we can understand why it is necessary to mention that not only is G-d holy, but His names are holy as well. “You are holy” refers to G-d’s essence, which remains totally above all of creation. This is the highest level of holiness. Next we say “Your name is holy,” since it is through the name of G-d that He becomes revealed and manifest within creation. Although this level of Divine revelation is part of creation it is still holy, since G-d’s name is ultimately connected to His essence — thus both His essence and His name are holy.
“…and holy ones will praise You… forever.”
The “holy ones” who praise G-d is a reference to the nation of Israel. On the surface, calling Israel holy presents us with a difficulty. How can we attribute the same quality (holy) both to G-d as well as His people? Does a king share his royalty with his entire nation?
The answer to this dilemma is found in the beginning of the Torah portion of Kedoshim where G-d commands us, “You shall be holy, for I am holy.” But how does G-d’s holiness provide a reason that we should be holy? The answer is that when G-d created us, He instilled within us a unique quality that derives from Him; for man’s soul is a part of G-d above. Regarding this soul, which was carved from under G-d’s throne of glory, it is explained that man was created in the image of G-d. Thus, it is by virtue of this soul that we are able to become holy.
It must be noted that the level of holiness we attain is incomparable to G-d’s holiness. G-d is holy in a true sense, but our holiness only stems from G-d, and is a result of His benevolence. That is why we praise Him as the true Holy One.