And let them make Me a sanctuary, that I may dwell among them. (Exodus 25, 8)
וְעָשׂוּ לִי, מִקְדָּשׁ; וְשָׁכַנְתִּי, בְּתוֹכָם
As the commentary in Etz Hayim notes: “The text does not tell of God dwelling “in it,” i.e. in the sanctuary, but “among them,” i.e., among the people of Israel.
Similarly, with regard to the First Temple and as memorialized on the Haftorah selection:
in that I will dwell therein among the children of Israel, and will not forsake My people Israel.’
וְשָׁכַנְתִּי, בְּתוֹךְ בְּנֵי יִשְׂרָאֵל; וְלֹא אֶעֱזֹב, אֶת-עַמִּי יִשְׂרָאֵל
This resonates with us moderns: God does not inhabit an edifice of bricks and mortar; he dwells in the hearts and minds of his faithful. For a humanist this translates into God lives inside of man. Dare we attribute such an enlightened interpretation to our forebears?
For classical theologians and mystics the question posed by a temple was more basic… how can it be that God can be confined to one place… any place?
By tradition, Jacob’s dream of the ladder with ascending and descending angels occurred at The Place (מקום) of the future First and Second Temple. the Rabbis assert:
“God is the place (makom) of the world, but the world is not His place” 
“שהוא מקומו של עולם ואין עולמו מקומו”
For the mystics the bigger problem is how to explain a finite physical world when God is infinite. If God is the Eyn Sof … an existence that suffers no beginning and no end, how is a created world with beginnings, ends and finite dimensions, let alone “evil” permitted to exist.
The standard answer in the kabbalah .. the Jewish mystical tradition, is that of the 10 sefirot. Everything is contained in God, but there are different emanations that shine and are reflected, in various degrees of physicality, which ultimately create a perception of a created world.
The same holds true for the temple. There is an eternal and entirely spiritual temple which God inhabits and which inhabits God… our material temple is simply a reflection of that celestial temple.
When Moses is commanded to build the tabernacle in Exodus 25:9, God instructs Moses:
And see that thou make them after their pattern, which is being shown thee in the mount. (Exodus 25: 40)
וּרְאֵה, וַעֲשֵׂה: בְּתַבְנִיתָם–אֲשֶׁר-אַתָּה מָרְאֶה, בָּהָר
As the Etz Hayim notes: “Exactly as I show you The tabernacle and its furnishings are conceived of as earthly replicas of heavenly archetypes… ”
According to this approach, the earthly temple is a reflection or emanation of a Celestial Temple. 
This concept of our Temple and services mirroring the Celestial Temple and prayer services of the Angels is institutionalized in our prayers especially the Kedusha where:
“We proclaim Your Holiness on earth as it is proclaimed in heaven above.” (see Siddur Sim Shalom p. 357)
נְקַדֵּשׁ אֶת שִׁמְךָ בָּעוֹלָם
כְּשֵׁם שֶׁמַּקְדִּישִׁים אוֹתוֹ בִּשְׁמֵי מָרוֹם
כַּכָּתוּב עַל יַד נְבִיאֶךָ
In the Pesikta D’Rav Kehana, which contains material that dates back to the times of the Midrash (3rd and 4th century) we find an fascinating rendering of this theology.
The Holy One, blessed be He, said to Moses: If you pattern the tabernacle here below after the one in heaven above, I will leave My heavenly counselors, come down, and so shrink My presence as to fit into your midst below. (Pesikta de-Rav Kahana 1:3)
כך אמר הב”ה למשה, משה אם אתה עשה מה של מעלה למטה אני מניח סנקליטין שלי של מעלן ויורד ומצמצם שכינתי ביניכם למטן.
For anyone who has heard of Lurianic Kabbalah and the system of Tzimtzum this is a truly revolutionary midrash and the only Midrashic/Talmudic reference to the Tzimtzum of God in Rabbinic literature.
Let me explain… According to Gershom Scholem, the preeminent authority on the development of the Kabbalah, the de facto solution to the infinite God creating a finite world conundrum; not to mention His dwelling in a wordly temple, was the theory of emanation. In the theory of emanation God’s totally spiritual and infinite presence is reflected through a series of increasingly degraded and physical illuminations and reflections until the physical is possible.
This solution is philosophically unsatisfying since it literally kicks the can down the road… but it was the best that the mystics could do and it survived from the earliest days of the Kabbalah and Zohar until the expulsion from Spain in 1492… close to 1,000 years after our Tzimzum midrash was written.
The expulsion from Spain disrupted Jewish thought and sensitized the mystics to the dialectic between Exile and Return and suffering and redemption.
Isaac Luria who lived only to the age of 38 turned the theory of emanation on it’s head. According to Luria, God didn’t so much as create the physical world as He contracted Himself into Himself in order to permit the existence of a physical world, including matter, evil and … a temple.
In my view, this emanation on-it’s-head approach is as philosophically unsatisfying as emanation. It begs the same question. But from a poetic, humanist, existential let alone pedagogic perspective it is stellar. Any parent who learns to step back in order to permit a child to move forward will appreciate Tzimtzum!
According to Scholem, Tzimtzum (contraction) “is one of the most amazing and far-reaching conceptions ever put forward in the whole history of Kabbalism. Tzimtzum originally means “concentration” or “contraction” but if used in the Kabbalistic parlance it is best translated by “withdrawal” or “retreat”…
“Instead of emanation we have the opposite, contraction. The God who revealed himself in firm contours was superseded by one who descended deeper into the recesses of his own Being, who concentrated Himself into Himself, and had done so from the very beginning of creation.
צמצם עצמו מעצמו אל עצמו
To be sure, this view was often felt, even by those who gave it a theoretical formulation, to verge on the blasphemous. Yet it cropped up again and again, modified only ostensibly by a feeble ‘as it were’ or ‘so to speak.’ (p 260-261)
Another way of phrasing contraction would be diminution. In a very real and radical way, tzimtzum implies that God commits the ultimate blasphemy/sin.. he diminished Himself.. the Godhead.
Tzimtzum is a variation on the old conundrum… If an all powerful God can make anything… can He make a weight that is too heavy for He Himself to lift? In the case of tzimtzum the answer is Yes. God can diminish himself to a point that He alone cannot repair the damage…. As it were.
It is clear to me that tzimtzum is a dialectical process. As in our original midrash, God withdraws from the celestial temple to concentrate into the temporal temple. And, according to Luria, when God withdraws He leaves [concentrated] traces of His holiness called Reshimu or residue similar to the residue of oil or wine in a bottle the contents of which have been poured out. The process is not smooth, it is disruptive to the point that Luria coined a term “Breaking of the vessels” Shevirat haKelim to refer to this big bang of contraction.
When God contracts, the vessel that holds Him is ruptured into pieces. Both the residue and broken pieces contain remnants of the infinite. God is removed, exiled (c.f. “the Divine Presence in Exile” – שכינתא בגלותא) and separated from these remnants and only man can unite God by repairing these broken pieces and this is redemption – Tikun.
This is the mystical concept of Tikkun Olam, fixing the world. What it has in common with the social-action concept of Tikkun Olam is that both are thoroughly dependent on Man.
Getting back to our Temple…
We now come full circle and have a radically humanistic conception of God’s presence in our world.. hinted at first by the Rabbis of the Fourth Century Midrash and flushed out in a radical theology by a 30 year old decedent of refugees from the Spanish inquisition in Safed.
God’s dwelling in the Mishkan is dependent on man. The tabernacle and Temple represent a poetic dance between God and man, exile and return, suffering and redemption… for both parties. The vision of Jews and God outside of the temple, willingly withdrawing from the temple appears less absurd.
The Kotzke Rebbe’s answer to the question “Where is God?” is both empowering and obligating.
“Where is God? Wherever we let Him in.”
“ר’ הונא בשם ר’ אמי אמר: מפני מה מכנין שמו של הקב”ה וקורין אותו “מקום”? שהוא מקומו של עולם ואין עולמו מקומו” – בראשית רבה, ס”ח, י’
 For a comprehensive review of this literature see:
The Celestial Temple as viewed in the Aggadah by Victor Aptowitzer found in Binah: Volume I; Studies in Jewish History (Washington Papers) Paperback – June 6, 1989 PRAEGER, NY Westport, CT, London