In the grand story of salvation, there are three acts:
1. Justification: God declares us righteous because of the righteousness of Jesus credited to our account.
2. Sanctification: God progressively begins making us into what he has declared us to be.
3. Glorification: God finishes making us perfect, just like Jesus. What God has declared and how we live are one and the same. This event takes place after we die and stand in the presence of God.
To better understand this progression, R. C. Sproul uses a helpful spatial analogy in the video below.