Martin Luther, Sermon on Galatians, 1532

This difference between the Law and the Gospel is the height of knowledge in Christendom. Every person and all persons who assume or glory in the name of Christian should know and be able to state this difference. If this ability is lacking, one cannot tell a Christian from a heathen or a Jew; of such supreme importance is this differentiation. This is why St. Paul so strongly insists on a clean-cut and proper differentiating of these two doctrines.
 

Martin Luther, (Luther's Works, Saint Louis Edition, 11:81ff)

The law is the Word in which God teaches and tells us what we are to do and not to do, as in the Ten commandments. Now wherever human nature is alone, without the grace of God, the Law cannot be kept, because since Adam's fall in paradise man is corrupt and has nothing but a wicked desire to sin and in his heart cannot be favorably disposed toward the Law, as we know by our own experience. For there is no one who would not rather have no Law at all, and everyone finds and feels within himself that while it is difficult to be pious and do good, it is easy to be wicked and to do evil. And this difficulty or this unwillingness to do what is good prevents us from keeping God's Law; for what is kept with dislike, difficulty, and unwillingness, rates before God as not having been kept at all. And so the Law of God convinces us by our experience that we are naturally wicked, disobedient, lovers of sin, and enemies of God's commandments.

Now from all this one of two things must follow: presumption or despair. Presumption follows when a man sets himself to fulfill the Law with works and diligently sees to it that he does what the letter of the Law asks him to do. He serves God, does not swear, honors father and mother, does not kill, does not commit adultery, and the like. Meanwhile, however, he does not observe his heart, does not note the reason why he is leading such a fine, good life, that he is merely covering the old hypocrite in his hear with such a beautiful life. For if he looked at himself aright, at his own hear, he would discover that he is doing all these things with dislike and out of compulsion; that he fears hell or seeks heaven, if not also far more insignificant matters, namely, honor, goods, heath; and that he is motivated by the fear of shame or harm or diseases. In short, he would have to confess that he would rather lead a different life if the consequence of such a life did not deter him; for he would not do it merely for the sake of the Law. 

But because he does not see this bad reason, he lives on in security, looks only at the works, not into the heart, and so assumes that he is keeping the Law of God well. The face of Moses is, therefore, covered
for him, that is, he does not recognize the meaning of the Law-- that
it wasn't to be fulfilled with joyful, free, cheerful will. Just so an unchaste person, when asked why he commits the act, can only
answer: Because of the pleasure I find in it. For he commits it for the sake of neither reward nor punishment, does not proposes to gain anything by it or to escape any evil through it.

Such pleasure the Law would also find in us, so that when you ask a chaste person why he is chaste, he should say: Not for the sake of heaven or hell, not for the sake of honor or shame, but simply because it appears to me to be very fine, and I heartily approve of it even if it were not commanded. See, a heart such as this really loves God's Law and keeps it with pleasure. Such people love God and righteousness, fear and hate nothing but unrighteousness. But no man is thus constituted by nature. The others, however, love the reward and the benefit, fear and hate the punishment and the pain. Therefore they hate God and righteousness, love themselves and unrighteousness; they are hypocrites, shams, deceivers, liars, and boasters. Without grace all men are of this kind, but especially the self-righteous. Hence Scripture says and concludes: "All men are liars" (Ps.116:11); and again (Ps 39:5); "Every man at his best state is altogether vanity"; and (Ps 14:3); "There is none that does good, no, not one." But despair follows when a man becomes aware of the reason why he is keeping the Law and recognizes that to love God's law is impossible for him, since he finds nothing good in himself but only hatred of the good and lust for the bad. Then he recognizes that works cannot do justice to the Law. Therefore he despairs of works and disregards them. He ought to have love, but he does not find any and of and by himself can have none. The result must be a poor, miserable, humbled spirit, a man oppressed and frightened through the Law by his conscience, which demands and requires of him what he has not a penny to pay. Yet the Law alone is of benefit to such presumptuous people, for it was given to work this knowledge and humiliation. This is it's (the Law's) proper work...

The other word of God is not Law or commandment, nor does it require
anything of us; but after the first Word, that of the Law, has done this
work and distressful misery an poverty have been produced in the heart, God comes and offers his lovely, living Word, and promises, pledges, and obligates himself to give grace and help, that we may get out of this misery and that all sins not only be forgiven but also blotted out and that love and delight to fulfill the law may be given besides. See, this divine promise of his grace and of the forgiveness of his is properly called Gospel. And I say again and yet again that you should never understand Gospel to mean anything but the divine promise of his grace and of the forgiveness of sin. For this is why hitherto St. Paul's epistles were not understood and cannot be understood by our adversaries even now; they do not know what Law and Gospel really are. For they consider Christ a Legislator and the Gospel nothing but the teaching of new laws. This is nothing else but locking up the gospel and obscuring everything. For "Gospel" is Greek and means "good news," because in it is proclaimed the saving doctrine of life, of the divine promise, and grace and the forgiveness of sins are offered.

Therefore works do not belong to the gospel; for it is not laws but faith alone, because it is nothing whatever but the promise and offer of divine grace. He, then, who believes the Gospel receives grace and the Holy Spirit. Thereby the heart becomes glad and joyful in God and then keeps the Law gladly and freely, without the fear of punishment and without the expectation of reward; for it is sated and satisfied with that grace of God by which the law has been satisfied.

Martin Luther