In the New International Version this section is entitled "The Jews And The Law"
In this section Paul is addressing The Jews
He says that knowing the law is one thing but obeying it is another, and hints that his audience may very well be guilty of confusing the two
He then goes on to say that it is possible for an uncircumcised person to be more righteous than a circumcised person, that being circumcised doesn't make you more holy than a person who isn't
He says that breaking "the law" cancel out one's circumcision and that being circumcised is not what truly makes a person Jewish - observing scripture is
I think he is saying that when it comes to religion circumcision is an optional add-on
He then goes on to say that there is such a thing as "circumcision of the heart" by The Holy Spirit
He is basically saying that true inward spirituality is better and more important than outward spirituality (such as circumcision) - that having God in your heart is more important than being circumcised - which is what he means by "circumcision of the heart" - a heart transformed by God rather than a penis transformed by a blade
He is therefore saying that in order to be a man of God one does not need to be circumcised, only to let Jesus in and to then live accordingly - with reference to scripture.