The Rebbe begins by quoting the verse, "והיה מעשה הצדקה - שלום. ועבודת הצדקה - השקט ובטח עד עולם"—the act of tzedakah brings peace, and the service of tzedakah brings quiet and security forever. The Rebbe points out that the verse distinguishes between two things: מעשה—the act, and עבודה—the service or labor. Similarly, there are two outcomes: שלום—peace, and השקט ובטח עד עולם—quiet and security forever. The Rebbe asks: what is the difference between these two levels of tzedakah, and what is the difference in their results?
To explain this, the Rebbe brings the teaching of our Sages on the verse, "עושה שלום במרומיו"—He makes peace in His heights. What does it mean that Hashem makes peace above? The Rebbe explains that there are two angels: מיכאל, the officer of water, and גבריאל, the officer of fire. These represent two opposing forces: מיכאל stands for chesed—kindness, which is called "water" because water naturally flows downward, symbolizing giving and bestowing. גבריאל stands for gevurah—severity or restraint, which is called "fire" because fire rises upward, symbolizing holding back and withholding, only giving in a very limited and contracted way.
These two forces, chesed and gevurah, are naturally opposed to each other. One wants to give without limit, the other wants to withhold and restrict. When they are left on their own, there is conflict between them. However, Hashem, the Holy One, blessed be He, "makes peace" between them. How does He do this? By revealing a powerful and overwhelming light from the Ein Sof—the Infinite One. This light is so great that it is beyond any measure, even beyond the highest intellectual faculties, and it shines into both chesed and gevurah.
When this infinite light is revealed, the opposing traits of מיכאל and גבריאל are absorbed back into their source and root, and they become truly united. They are nullified in the face of this great revelation, and instead of clashing, they blend together. The gevurah—the strictness—becomes sweetened and merged with chesed through an intermediate level, which is called the "deciding line" that leans toward chesed. This is the attribute of rachamim—compassion, which is called tiferes—beauty, in the language of the sages of truth, the Kabbalists.
Why is it called tiferes? Because it includes both colors—white and red, which hint to chesed and gevurah. Just as something with many colors is more beautiful than something with only one, so too, the blending of chesed and gevurah creates a new, beautiful quality. Straight chesed or straight gevurah alone is not beautiful; the beauty comes from their combination.
The Rebbe explains that in the Torah, the name of Hashem, Yud-Kei-Vav-Kei, generally refers to the attribute of tiferes, as the Zohar teaches. This is because tiferes is the result of Hashem "making peace"—it is the harmonious blending and sweetening of the opposing forces, accomplished through a greater revelation of the Infinite Light than is present in the individual attributes of chesed or gevurah alone.