It is helpful to see that there are four kinds of people in the world:
Law-obeying, law-relying. These people are under the law, and are usually very smug, self-righteous and superior. Externally, they are very sure they are right with God, but deep down, they have a lot of insecurity, since no one can truly be assured that they are living up to the standard. This makes them touchy, sensitive to criticism and devastated when their prayers aren’t answered. This includes members of other religions, but here I am thinking mainly of people who go to church. These people have much in common with the Pharisees of Jesus’ day.
Law-disobeying, law-relying. These people have a religious conscience of strong works-righteousness, but they are not living consistently with it. As a result of this, they are more humble and more tolerant of others than the “Pharisees” above, but they are also much more guilt-ridden, subject to mood swings and sometimes very afraid of religious topics. Some of these people may go to church, but they stay on the periphery because of their low spiritual self-esteem.
Law-disobeying, not law-relying. These are the people who have thrown off the concept of the law of God. They are intellectually secular or relativistic, or have a very vague spirituality. They largely choose their own moral standards and then insist that they are meeting them. But Paul, in Romans 1:18-20, says that at a sub-conscious level, they know there is a God who they should be obeying. Such people are usually happier and more tolerant than either of the above groups. But usually there is a strong, liberal self-righteousness. They are earning their own salvation by feeling superior to others. It is just that this is usually a less obvious kind of self-righteousness.
Law-obeying, not law-relying. These are Christians who understand the gospel and are living out of the freedom of it. They obey the law of God out of grateful joy that comes from the knowledge of their sonship, and out of freedom from the fear and selfishness that false idols had generated. They are more tolerant than number 3, more sympathetic than number 1, and more confident than number 2. But most Christians struggle to live out number 4, and tend to see the world as a #1, #2, or even #3 person. But to the degree that they do, they are impoverished spiritually.
– Tim Keller