A few thoughts on this passage for whatever they're worth . . . "But you are a chosen race, a royal PRIESTHOOD, A HOLY NATION, A PEOPLE FOR God's OWN POSSESSION, so that you may proclaim the excellencies of Him who has called you out of darkness into His marvelous light." (NASB)
The phrase "we are a chosen race" . . in looking at the entire passage, the terms "chosen race" and "royal priesthood" and "holy nation" seem to be symbolic, not literal, as we are not literally a royal priesthood. I believe (and I could be wrong) that the term "chosen race" is not literal as well. I think that the reformists I have known would say this is yet another example of election (I could be wrong on that as well). However, I see the term "chosen race" to symbolize the Jewish race as they were God's "chosen" people to convey His truths in the Old Testament and bring forth the Messiah, Jesus Christ. We who have recieved Christ's transforming power in the Holy Spirit are now God's "chosen race" as, before Jesus came, were the Jewish people.
The phrase "we are a . . . royal PRIESTHOOD" also appears to be symbolic. My study notes helped me understand this term to mean that we can now come before God on our own, without the mediation of a priest. In the Old Testament times, a priest acted as the mediator between God and man. Now we can go directly to God, as the priests did in Old Testament times. And we as Christians, have the responsibility to help bring others to God, as the priests did in the past.
Maybe I'm way off base on all that stuff, but I know I'm not on the next part of the passage where God says He has called us "out of the darkness and into His marvelous light." Before I was saved and had the Holy Spirit enter my life, I was in the darkness. I didn't know I was in the darkness, but I was in the darkness nevertheless. When God began calling me, in the summer of 1995, and I began calling on Him as well, I began to see that there was something more out there that I didn't have. I wasn't a Bible reader. I didn't have the Jehovah's coming to visit. Didn't hear any sermons. I just knew there was something more that I was missing, which I later came to understand that God was calling me . . or I was knocking at the door and He was answering, whichever it was. I didn't fully understand the whole "lightness and darkness" thing until October of 1995.