Salvation by grace alone means that our rescue from sin is entirely a gift of God's unmerited favor, having no basis in our own works or merit. It is the announcement that God, in Christ, has done everything necessary to reconcile us to Himself, and we receive this benefit through faith alone, which is itself a gift from God.
Salvation originates not in the human heart, but in the heart of God. To say we are saved by grace alone is to confess that from eternity past, God determined to deliver a people from destruction solely because of His boundless love and mercy. As Charles Spurgeon explains, grace is the fountainhead, while faith is merely the channel through which that grace flows. We are more sinful than we dare believe, meaning we have no reservoir of merit to draw upon; therefore, we are entirely dependent upon the 'pure river of water of life' that flows from the throne of God, as described in All of Grace Ch.7. As the apostle Paul writes: 'for by grace have ye been saved through faith; and that not of yourselves, it is the gift of God' (Ephesians 2:8).
The grace of God is not an abstract concept; it is embodied in the person and work of Jesus Christ. Because we are convicted of our sin before the judgment seat of God, we require a substitute. God, in His grace, provided His own Son to satisfy divine justice on our behalf. He imputes Christ's perfect righteousness to us, so that we are accounted righteous in His sight—not for anything we have done, but for the 'perfect obedience and full satisfaction of Christ' (Westminster Larger Catechism Q.71). We are accepted because He was rejected; we are loved because He bore the wrath we deserved. As Scripture testifies: 'Him who knew no sin he made to be sin on our behalf; that we might become the righteousness of God in him' (II Corinthians 5:21).