I read this entry from someone else's blog, and found it so clear and helpful that I decided to repost it here. Enjoy!
If you look at an interlinear Greek NT, you’ll see the passage reads as follows: “For by grace ye are saved through faith, and this [τοØτο] [is] not of yourselves, [it is] the gift of God, not of works lest anyone might boast.”
The pronoun τοØτο is a demonstrative pronoun. It points out a thing that is referred to. It is neuter in gender and singular in number, meaning it can only refer to one thing, not many things. It generally refers to concepts. It could be translated “this thing.” It is nominative in case (the subject of the verb). For example, “This thing is not of yourself, [it is] the gift of God.”
A person who values expository preaching like you do needs to correctly identify the antecedent of a pronoun to identify what a pronoun refers to. In this case, “faith” is the nearest one in the passage, but that means nothing in itself, because there many places in the bible where a given pronoun does not agree with the nearest antecedent.
There is a rule in Greek grammar: pronouns must agree with their antecedent in gender and number. Their case is determined by their use in their own clause.
We’ve already established that the pronoun “this” in verse 8 is neuter in gender. The word “faith” in verse 8 is FEMININE in gender. This effectively rules out “faith” as the antecedent because “faith” does not agree with the pronoun in gender. If Paul wanted his readers to understand the pronoun as referring to “faith,” then there is no reason why he would not have used the feminine form of the demonstrative pronoun, which would be the Greek word αυτη, because this would have settled it, and the verse would essentially read, “For by grace are ye saved through faith, and this feminine thing (in this case, faith), is not of yourselves, it is the gift of God.”
However, Paul did not use the feminine pronoun. So, what’s he talking about? If Paul intended the pronoun to refer to the idea or concept contained in the verb, the neuter form would be the one to use, and that is exactly what he did use.
Going back to the fact that the pronoun τοØτο generally takes a conceptual antecedent, if we assume that Paul is talking about an idea, the passage makes more sense. Paul is talking about how a person is saved. That is his main idea. What we have here is not a dissertation on faith, but we do have a brief dissertation on salvation in general. Salvation is not of yourselves, it is by grace, it is through faith, it is not of works, it is the gift of God. Faith is mentioned because you obviously cannot talk about how a person is saved without mentioning it.
The gift of salvation has to be personally received, and it is received by faith in Jesus. What Paul is talking about in these two verses is salvation, not faith, because faith is not the gift, it is how we receive the gift.