Psalm 76:1-3 (ESV)
In Judah God is known;
his name is great in Israel.
 His abode has been established in Salem,
his dwelling place in Zion.
 There he broke the flashing arrows,
the shield, the sword, and the weapons of war.
His abode has been established in Salem. The God who cannot be contained. The God of whom Solomon said the temple he built could not contain Him. THIS God chooses to dwell in Salem, Jerusalem, in a way that He does not live anywhere else. This is a veritable wonder. That God should choose to dwell anywhere specific on the planet that He created for His glory should stun us.
But God did not simply choose to dwell in a city. He has chosen to dwell in the midst of His people. And this is what is being said here. Christians are not simply indwelt by the Holy Spirit in an individualistic sense. Jesus does not just live in the heart of individual believers. The great holy triune God lives in His people. He dwells in the midst of the congregation. He is not just for me. He is for us.
Children behave better when their parents are with them than when they are left unsupervised. They know that if they hit their little brother or steal his cookie they are much more likely to be caught than if the parent leaves the room for a few moments. The absence of parental control is opportunity to express the evil dictates of their little depraved hearts.
God dwells in the midst of His people. How often do we think this when opportunity arises to gossip about a fellow believer? Does this thought occur to us when we are in meetings and there is a difference of opinion? Will we behave like God is here? We should, because He is.
Of course the Psalm is not talking about behaving well because of the presence of God in this Psalm. He is talking about the defence that he knows is his since God lives in his city. The fact that God lives in the midst of His people means that they have protection and counsel and help and consolation and wisdom … . It is a terrifying thing to be brought into the presence of greatness. But the greatest of the greatest lives among us. And the only reason we are able to survive such a thing at all is mercy.
God lives in the midst of His people. That should cause us to live boldly, in holiness. It should make us fearless to live in holiness in the midst of great wickedness. It should enable us to live non-conformed lives as daily acts of worship. It means we have a power for righteousness that is far beyond what we can ask or think. It means that our sin is always our fault because He who dwells within us could have led us to not commit the sin, but we chose to go our own way instead of His. God dwells in His people. This should humble us and lead us to repentance and lead us to thankfulness and lead us to great acts of courage for the cause of the King. Oh what God has done.