Ego can be said to be a condition of duality; a false sense of separateness. But the words "ego" and "egolessness" have developed too many connotations to be of any real use in a Buddhist context; so, instead, we will use the term "distracted-being" for "ego"; and "liberated-being" for the even more confusing term "egolessness". The term "distracted-being" carries the idea that our enlightenment and "unenlightenment" are not separate. They are not heaven and hell. They are not God and Devil. We have never been separated from enlightenment -- we only seem to be separated. But this apparent separation is what we ourselves have fabricated through our dualistic perspective. It is this dualistic perspective which causes us to generate obsessive attempts to divide our experience into perception and field of perception. However, because it is not possible to divide experience in this way, we put ourselves in an impossible situation, in which we imagine that this division occurs naturally. This is what is known as illusion or indirect experience -- living in a waking dream world that is loosely based on direct experience.
In western psychology, ego arises as a necessary process of child development. Before ego develops (between the ages of 12 and 36 months), the child lives in an undifferentiated world where there is no distinction between self and other -- this is the essence of the narcissistic state. A true narcissist never develops the distinction that allows an understanding that what he feels, wants, and thinks isn't what everyone else in the room feels, wants, and thinks.
In healthy ego development, however, the sense of self becomes distinct from the environment. As the child grows older, the sense of self becomes more and more concrete, capable of making endless distinctions about self and the world. This is necessary and healthy. At the higher stages of adult development, especially if one undertakes a spiritual path, the goal then becomes the lessening of ego's grip on the world.
Buddhism often doesn't acknowledge the necessity of a healthy ego. Most Buddhist writings detail ways to undo the ego, which is great if one has developed a healthy ego without any glitches at any of the developmental levels. Few of us have made it to adulthood without some damage to our egos.
So the attempt to break down or transcend the ego should not be undertaken until and unless one has a reasonably healthy ego structure with which to begin. Those who are lacking in this area should be advised to enter into therapy as a prerequisite for higher-order work.
That said, the point of this whole rambling post is that many people read the statement "we have never been separated from enlightenment" as suggesting that any effort to reduce the ego's clinging to differentiated perception is tantamount to a "return to the primordial oneness of birth," before we were "corrupted by the development of ego." Many western psychologists who are otherwise brilliant men and women have made this mistake -- most notably Mark Epstein (Thoughts Without a Thinker) and Michael Washburn (The Ego and the Dynamic Ground).
This isn't the case. The predifferentiated state of the infant is completely prepersonal, prerational, and pre-egoic. The transdifferentiated state of the spiritual master is transpersonal, transrational, and transegoic. You cannot transcend an ego that has not developed. This is the major thesis of Wilber's The Atman Project.
In order to transcend ego and reach states of nondual consciousness, we must develop an ego in the first place. Otherwise, we are nothing more than narcissistic infants unable to distinguish ourselves from the arms in which we are being held.
That said, we are never separate from our enlightenment. We are at all times living in nondual consciousness -- it is not something we have to earn, work our way toward, or ascend a hierarchy to experience. All we ever have to do is drop the curtain of ego to experience this nondual state. Learning to do this simple task is the hardest thing most of us will ever do.