In the sixth month of Elizabeth’s pregnancy, the angel Gabriel appeared to Mary. She lived in Nazareth, a city of Galilee, and was engaged to Joseph from the royal house of David. (Luke 1:26, 27) Through the prophet Nathan, David had been divinely promised that his royal line would continue in existence, and this provided the basis for the Messianic hope, the coming of a king greater than David. (2 Samuel 7:8-16; compare Acts 2:30, 31.)
According to the literal reading of the Greek text, the angel greeted her with the words, “Rejoice, highly favored one, the Lord [is] with you.” (See the Notes section for additional comments.) To be addressed as exceedingly favored and having God’s attentive care greatly perplexed Mary, causing her to wonder just what this greeting signified. Gabriel reassured her with the words, “fear not,” informed her of having found favor with God, and then told her that she would give birth to a son, to be named Jesus. This son would be great, “be called Son of the Most High,” receive from God the throne or royal authority of his ancestor David, and “reign over the house of Jacob forever.” His kingdom would never come to an end. (Luke 1:28-33)
Unlike Zechariah who responded to Gabriel’s announcement with doubt, Mary only raised the question as to how this would come about as she was unmarried and not intimate with a man. The angel explained to her that this would be made possible through the operation of holy spirit or the “power of the Most High.” Because the conception would result from the mighty working of divine power, the son to be born would be “called holy, [the] Son of God.” (Luke 1:34, 35)
It may well be that, for the first time, Mary learned from Gabriel that her relative Elizabeth, who had long been barren, was in the sixth month of her pregnancy and would give birth to a son. Elizabeth’s pregnancy, as Gabriel indicated, proved that nothing would be impossible with God. (Luke 1:36, 37)
Mary’s response proved to be one of remarkable faith. No virgin had ever conceived through the direct working of God’s mighty power, and she must have known that she would never be able to convince others of having maintained her virginity. Yet, with full trust in the Most High and his care for her and the son to be born, she declared her willingness to be God’s servant, letting everything take place according to what Gabriel had told her. At that point, the angel departed. (Luke 1:38)
See http://bibleplaces.com/nazareth.htm for pictures of and comments about Nazareth.
As a greeting, the Greek term chaíro (“rejoice”) expressed an implied wish for the happiness or well-being of the person being addressed. It functioned much like the Hebrew shalóm (“peace”), which also conveyed the thought of well-being, and may have been the expression Gabriel used.
Jesus’ future kingship is described in a way that accommodated common Messianic expectations. The reality, although including an everlasting rule over the “house of Jacob” or Israel, is far grander. Mary, however, would not at that time have been able to grasp a description in terms unfamiliar to her. (Luke 1:32, 33)
In Luke 1:35, “holy spirit” and “power of the Most High” are parallel expressions, as are also the words “come upon” and “overshadow.” It should be noted that Mary would not have understood Gabriel’s words to mean anything other than what she knew about God’s spirit from the “holy writings” that were read in the synagogue. Those “holy writings” confirm that “holy spirit” is God’s power, dynamically at work in a holy or pure way for the accomplishment of his will.