Is salvation acheived by faith alone, or does it in fact require some works?

I was raised a Lutheran, and am looking for an answer from someone (like a Lutheran) who believes in salvation by grace alone (by faith alone, etc.). I still believe in salvation by faith alone because much of the New Testament seems to indicate this (John 3:16, Romans 3:28, 1 Corinthians 3:11, etc), but I am wondering how we rationalize these words of Jesus (below) and how they can be reconciled with the 'faith alone' philosophy. They seem to explicitly state that one 'must do the will of the father' in order to enter the Kingdom of Heaven (have salvation, right?). Jesus said, in Matt 7:21-23 (NASB) 21 “Not everyone who says to Me, ‘Lord, Lord,’ will enter the kingdom of heaven, but he who does the will of My Father who is in heaven will enter. 22 Many will say to Me on that day, ‘Lord, Lord, did we not prophesy in Your name, and in Your name cast out demons, and in Your name perform many [a] miracles?’ 23 And then I will declare to them, ‘I never knew you; DEPART FROM ME, YOU WHO PRACTICE LAWLESSNESS.’