Since the Scholastic period and especially after the Council of Trent, Catholic theology has spoken of salvation and grace in terms of actual grace and habitual grace. Habitual grace is also called sanctifying grace or deifying grace.
Actual grace is the supernatural assistance of God for salutary acts granted in consideration of the merits of Christ. Actual grace is called "actual" because it refers to direct acts of God. Actual grace refers to a special help that God may give for a moment or certain act. Actual grace is gratia gratis data or "grace freely given."
You might think of "actual graces" as zaps from God that enable someone to do something salutary. They are "graces" or "charismata." Acts of prophecy, tongues, healings, miracles, even the priest's ability to absolve sinners in confession or confect the Blessed Sacrament are accomplished by actual grace. The initial grace of God given to a sinner to be able to repent and trust in Christ is also an actual grace. Again, think of "zaps".
Habitual or Sanctifying Grace
For the most part, Protestant reject the formal Catholic doctrine of habitual or sanctifying grace.
This kind of grace is called habitual grace on account of the Latin word habere meaning "to have or posses." It is the kind of grace possessed in the soul of the redeemed Christian. It is also called sanctifying grace because brings life to the soul and allows the will to conform a person to the holiness of Christ. It is called deifying grace because its presence in the life of a believer allows for the presence of the eternal divine life of the the Blessed Trinity to dwell in the soul.
When you hear a Catholic speak of "being in a state of grace" they are referring to being in a state of habitual or sanctifying grace. According to Catholic theology, if you die with habitual or sanctifying grace in your soul, you are saved and not damned.
How do you receive sanctifying grace?
St. Paul refers to habitual or sanctifying grace in Galatians 5:4. It is also the "new man" of which Paul speaks (cf. Eph 4:24). St. John calls it the abiding "seed of God" (1 Jn 3:9) that dwells in the Christian. Habitual or sanctifying grace is the grace we receive when we are born again and become sons of God by divine adoption or filiation. It is received by faith in baptism and it can be lost through mortal sin. Once lost through mortal sin, it is restored through sacramental confession.
The possession of habitual or sanctifying grace entails the presence of the Holy Spirit - for the two go together.
The Church would cite Romans 5:5 as an example of this twofold reality:
"The charity of God is poured forth in our hearts by the Holy Spirit, who is given to us."Here the charity of God poured into us is sanctifying grace and it is accompanied by the Holy Spirit who dwells in us. Thus we become temples of the Holy Spirit (cf. 1 Cor 3:16).