What Obama was trying to say was how ingrained racism is into American culture. His grandmother was able to overcome that racism with regards to Obama because of her love for him. She was able to see past the color of his skin and truly know him. But even having such a close connection to blacks, she still succumbed to her ingrained racism when she encountered other African Americans. Obama used this story to show an example of how people are capable of rising above racism but that the ingrained nature of racism itself is difficult to overcome, even for someone so closely connected to that which they are prejudiced against.

He was trying to set an example for all of us in his speech by acknowledging the divisiveness of Wright's comments but embracing the man he knew was underneath all the racially-charged and anti-American statements, regardless of all the damage this could do to his campaign. He was showing us what it means to rise above racism - to acknowledge one's faults, address them, and focus on the inherent good in people.