There are two levels in the [refinement of the] middos (emotional attributes). The first is iskafia, where the emotions obey the dictates of the intellect (in refraining from unwanted behavior). The second is is'hapcha, to completely transform the middos.

To illustrate: imagine a person has a competitor in his line of business, in the same district. When he allows himself to be controlled by his animal soul, animosity is aroused in him toward his competitor. The intellect of the G-dly soul then comes and says: Certainly you are a believer that G-d is the Master of the universe; therefore, if G-d has ordained for you to earn a livelihood, how can your competitor take it from you, contrary to G-d's will? If, however, it was decided on High that you would earn less income, do you think that the competitor is the only means by which G-d can accomplish this? Therefore, your competitor is taking nothing from you. If so, why should you resent him?

After many internal debates, the person begins to feel that this hatred ceases to affect his actions, then his speech, and finally even his thoughts. However, the person still does not reach the level of is'hapcha, transformation.

The G-dly soul continues and says, "You must love your fellow as yourself." After all, you are a specialist in his line of business, and since his success has no effect on yours, help him with some good advice, with a loan, etc., until ultimately, the hatred is transformed to love.

This latter part is the meaning of the loftier level of is'hapcha.

Igros Kodesh of the Rebbe, vol. 3, p. 197