Plainly it means set aside, set aside for God.
We are able to merit our Holiness through Jesus Christ, but first sanctifying ourselves (baptism, which just requires faith) and justification (works & faith). Like I said above, it is setting ourselves aside for God. No, it is not permanent, you can be a very holy person, become a bad person. If you do not obtain it before hand, I do not suspect you can afterwards.
It sounds materialistic, but it's talking about the soul of the person. Yes, it is part of holiness. It is in material terms, however is ever much ghostly.
No, being Holy doesn't put up a barrier that won't allow us to sin again. It means you've not inflicted yourself with mortal sin. There have been some people like St. Thomas Aquinas who have made a vow of celibacy and then never had a struggle the rest of their lives. However, that is not everyone.
If something is holy, it is set aside for God, like the holy fat of the animal sacrifices, it was set aside for God.