illustration (attribution, if any possible, is at the end of the article)
In relation to other persons, "seeing things as they are" is usually a lot more disquieting than it may seem (or be hoped to be) at first.
Focusing on the entrails of a person you are infatuated with is a classic technique to stop the 'idealisation' of the object of your infatuation. Focusing on how impermanence will affect a cherished body (with sickness, ageing, death, decomposition…) is another classic technique.
But it works both ways (gplus.wallez.name/8aLL8FjQUs9), and focusing on the qualities of a person you have aversion for, focusing on finding something 'beautiful' about a person you have aversion for (any trait: physical, intellectual, ethical… cf. gplus.wallez.name/4qxzGFroCjT), are two classic techniques to overcome hatred.
"Seeing things as they are" is a description of lack of prejudice, a lack of preference a priori. It is a description of lack of automatic reaction (lust or aversion) to any particular phenomena/trait; and an absence of automatism is a key requirement for what we might call 'freedom'.
Nirvāṇa is very commonly described in negative terms, i.e. in what it is not. Sometimes, people feel like this is "avoiding the question" of what nirvāṇa is, and so there are a few assertive descriptions like 'bliss' or 'freedom (from lust, hatred and ignorance)'. Funnily enough, if the best characterisation of 'freedom' is an "absence of automatism", the negative traits and positive traits are all showing their empty nature.
One aspect we know is not 'freedom', is the uncontrolled quest to fulfil one's wishes. This typically is the 'dictature' of wishes, i.e. an automatic response "I want therefore I need."
Freedom doesn't deny causality. The embodiment of freedom merely keeps questioning causality, it pays attention to causality: it remains vigilant to the gaps, to what is not deterministic, to what could offer a choice, to what could become different and what could be influenced… If we talk of influence, we talk of freedom very much playing with causality!
In relation to other persons, "seeing things as they are" is usually a lot more disquieting than it may seem at first.
The injunction might be used pragmatically to liberate oneself from automatic responses (this is practical but this is also limiting the practice to "spiritual materialism", limiting the practice to what you hope to worldly benefit from it). However, when you don't react as you expected yourself to react, you might start feeling some deep anguish arising about who you are! "Not knowing" or selflessness are not particularly comfortable states until you learn to trust that you don't vanish, that you're still here (without having to actively perpetuate yourself, via clinging to opinions, and narratives about your past, and preferences, etc.).
This being said, you don't need to fear that it might be hard to navigate a situation when every single person around you is both 'attractive' and 'repulsive' at any point in time. Attraction and repulsion are still responses to prejudices, to preferences a priori. Freedom from automatic response manifests itself as equanimity: every single person around you is neither 'attractive' nor 'repulsive' at any point in time, unless you 'appropriate' your perception of him/her as such.
Freedom gives you a choice about how to respond to the presence of the other (without this presence deciding the response for you), a choice rather than a contradiction / confusion! You don't need to fear that it might be hard to navigate a situation (gplus.wallez.name/G28hdsxKsDP), the fear is just a narrative to cling to your old ways, the evidence from the Buddha suggests he was far from confused or suffering from contradictory feelings… You can attain a state, in which you can freely pick whether to see the skeleton or to see the flesh, depending on what the situations requires.
The Mahāparinibbāna sutta (DN 16) contains a passage (which has been used —among others— to justify sexism in Buddhist settings):
« Then the Venerable Ananda said to the Blessed One:
– "How, Lord, should we conduct ourselves towards women?"
– "Do not see them, Ananda."
– "But, Lord, if we do see them?"
– "Do not speak, Ananda."
– "But, Lord, if they should speak to us?"
– "Then, Ananda, you should establish mindfulness." »
Hopefully, the above explanation will have made clear that this sutta is not to say that women should not be seen as human beings with buddha-nature, but this is simply to say that women should not be seen as female (i.e. gender-related, i.e. sex-related) when it is inappropriate in the given context.
In the sutta, the context is the setup of "places of pilgrimage" once the Buddha will have passed away. To state that a pilgrimage is not the appropriate context for sexually-tainted relationships hardly is a condemnation of womanhood: the sutta simply rejects judging appearances ('seeing' in a sexually-tainted way) and flirting ('speaking' in a sexually-tainted way) during pilgrimages! The sutta simply points to Liberation from automatic responses, i.e. points to the freedom of a context-appropriate response. You don't need to be afraid of loosing yourself when claiming such freedom.
drawing on photo: (I believe the source to be) © Mike Pace, http://mikepaceart.ca/post/18989411805/first-of-two-for-an-anatomy-assignment