What does Matthew 1:21 mean?

God is revealing to Joseph His plan to bring the promised Savior into the world. Joseph already knows that his betrothed wife is pregnant. As anyone would, he assumes this has happened as a result of her having sex with another man, breaking the terms of their betrothal. He had planned to divorce her, quietly, which would have been a relatively compassionate response (Matthew 1:19).

Before he ends the relationship, however, an angel from God appears to Joseph in a dream. The angel tells Joseph not to fear going through with the marriage. Mary is pregnant by the Holy Spirit, not by sexual sin, and not from another man.

The angel continues in this verse with more details. The baby is a boy. You will call His name Jesus, the angel says, because He will save His people from their sins. The Greek name Jesus is derived from the same Hebrew name from which we get the name "Joshua". This name means "Yahweh saves." The angel's revelation to Joseph is specific: not that Jesus will free His people, the Jews, in some general sense. The angel does not say Jesus will end Israel's captivity under Rome. The prediction is that Christ will save His people from their sins.

Matthew's Gospel will make clear that salvation from sin was needed far more than salvation from Rome.