Reading "Mere Christianity" and having a hard time with book III, chapter 12 I am reading "Mere Christianity" by C.S. Lewis and just finished Chapter 12 in the 3rd section. In this chapter he is discussing the idea that we need to realize we cannot fight sin ourselves, but we must "leave it up to God". We need to trust in following the path of Christ rather than simply putting our own effort forth to stop sinning. That's all great, but I'm having a hard time with the last two paragraphs. I was hoping someone could clarify what he is trying to say.


  I think all Christians would agree with me if I said that though Christianity seems at first to be all 
  about morality, all about duties and rules and guilt and virtue, yet it leads you on, out of all that, into 
  something beyond. One has a glimpse of a country where they do not talk of those things, except 
  perhaps as a joke. Every one there is filled full with what we should call goodness as a mirror is filled 
  with light But they do not call it goodness. They do not call it anything. They are not thinking of it. 
  
  They are too busy looking at the source from which it comes. But this is near the stage where the road 
  passes over the rim of our world. No one's eyes can see very far beyond that: lots of people's eyes can 
  see further than mine.
This is a fairly straightforward reference to the teaching that once saved, God works on us to make us more Christ-like. (More here)  This is a very common belief, in mainstream Christianity, and in not-so-mainstream denominations, such as the LDS Church.  It is also known as Sanctification.


  Progressive sanctification
  
  "Indeed, the more sanctified the person is, the more conformed he is
  to the image of his Savior, the more he must recoil against every lack
  of conformity to the holiness of God. The deeper his apprehension of
  the majesty of God, the greater the intensity of his love to God, the
  more persistent his yearning for the attainment of the prize of the
  high calling of God in Christ Jesus, the more conscious will he be of
  the gravity of the sin that remains and the more poignant will be his
  detestation of it....Was this not the effect in all the people of God
  as they came into closer proximity to the revelation of God’s
  holiness." -John Murray, Redemption Accomplished and Applied


The first paragraph you quoted alludes to the experience that in the beginning of our Christian walk, we all think about the rules a lot.  We think about avoiding this sin, trying to increase this positive trait.  As we become more conformed to the image of Christ, these things become more natural.  Our minds become more confirmed to the image of Christ through God's continuous work on us, and our own submission to His will that we no longer think about nit-picky rules, but instead, simply live in a way that is more Christ-like.  We don't think about it, we don't verbalize it, it becomes who we are.

In the end, we're not thinking about being good, we're too busy focusing on Christ Himself, the source of all goodness.

The last few sentences are indicating that Lewis didn't think he'd reached the same point in his walk as other, who were more closely confirmed to God's image than he was.

Taking this a step further, it is a quite lovely way of saying that Christianity isn't about rules, regulations, or morality, it's about Christ, and our relationship to and with Him.  We are "good" (or at least as good as we can be) because of the work He does in us, not because of our obedience to rules, but because of who we are through Him.  Our morality is based on our love for Him.  This is discussed here.