Separation of church and state means that church and state are to be separated in all things to a point that it doesn't impose on the other.
Such as the government has the duty to make sure all citizens are equal under secular law, but individual churches and church organizations can be discriminating if they so will. It means the government will not give funds or assets to churches or church organizations while at the same time not impose taxes on them as well. The church will not seek to influence laws and policies of the government that seeks to put them in favor or discriminate those who do not follow said church.
Basically, keep religion in the churchs and out of the state house and areas controlled by the state while at the same time keep the state out of the churches' affairs and their individual policies.
For example, The Boy Scouts of America is an organization that is closely affiliated with churches in their respective communities. Within their own private organization they can discriminate against those who do not fit their standards. However by doing so, and imposing their religious beliefs that effects their policies the state is obligated not to support them with additional funds nor provide free services for that organization.