This quote appears as Macbeth's soliloquy in Act I, scene vii.  Here, Macbeth's inner struggle is apparent as he tries to convince himself to kill Duncan.

The first eight lines represents Macbeth's desire to have the whole murder "over and done with."  He wants to do it quickly and to then move easily into the kingship.  However, he knows that once one murder is committed, he will probably have to commit additional murders or crimes to keep what he has gained.

He refers to this as a "poisoned chalice" in that he realizes the risks he would be taking in undergoing this crime.   Lines 9-14 explain his thoughts on taking this risk, possibly getting caught, and the damage it might to other people.

Lines 14- 27 give reasons why he should not kill Duncan.  He is Macbeth's cousin; he is visiting him in his home, where Macbeth is duty-bound to protect him.  Finally, he notes that Duncan is a terrific king, intellingent and well-loved by his subjects.  His murder would create emotional and political chaos in the kingdom.

Finally, the last three lines capsulize Macbeth's true realization:  if he kills Duncan, the only reason would be his own ambition.  He simply cannot rationalize away the murder. 

Macbeth begins to have doubts about the plan to assassinate Duncan. This is one of the first moments when we see Macbeth’s inner conflict. He is compelled by ambition and Lady Macbeth’s influence to carry out the “bloody instructions,” but he fears moral implications. In these lines, he fears the retribution he might face if he is caught:

Bloody instructions, which, being taught, return

To plague the inventor: this even-handed justice

Commends the ingredients of our poison’d chalice,

To our own lips.

Then Macbeth indicates that Duncan is trusting. Macbeth and Duncan are cousins (kinsman). Macbeth is his host and loyal subject. Duncan has every reason to trust Macbeth. This indicates that Duncan is vulnerable and an assassination would be easy. But because of this moral conflict, Macbeth decides not to go through with it:

                            He’s here in double trust;

First, as I am his kinsman and his subject,

Strong both against the deed; then as his host,

Who should against his murderer shut the door,

Not bear the knife myself.

But the main purpose of this monologue is to illustrate that Duncan is trusting and virtuous. Macbeth fears eternal damnation, which is more evidence that he is morally conflicted. Killing a virtuous person like Duncan would alert the heavenly authorities:

So clear in his great office, that his virtues

Will plead like angels, trumpet-tongued, against,

The deep damnation of his taking-off;

Here, “taking-off,” means to be killed and to take one’s possessions (the crown). If Macbeth were to kill Duncan, the angels (cherubim) “Shall blow the horrid deed in every eye,” meaning Macbeth would face moral and eternal consequences.

Macbeth concludes that the only incentive (spur) prompting him to consider killing Duncan is ambition. His ambition “overleaps itself,” and “falls on the other,” indicating his ambition is wild. Directed outwardly, it will manifest in violence.

After this speech, Lady Macbeth’s influence and his own ambition override this moralizing.