What is the essence of Luther’s distinction between the two kinds of righteousness? What are the implications of this distinction for various doctrines, e.g., sin, justification, sanctification?

[Austin]

Two Kinds of Righteousness: 1. Good Works of the Christian. 2. Good works of the nonbeliever. “Civic Righteousness.”
Sin: An Immoral act considered to be a transgression of divine law. We are fallen sinful creatures. Sinful creatures are still made in the image of God.
Justification: The act by which God moves a willing person from the state of sin(injustice) to the state of grace (justice).
Sanctification: A process to set something apart for God’s special use and purpose. God’s goal of sanctification is to change Christians to be like Christ.