Blessed/holy is derived from faith in a valid deity(by valid I mean one that actually exists. All gods are real in this setting so any given religion can gain access to holiness and even Saints, though Saints are called different things depending on what such a person is referred to in their religion. So blessing in the name of, say, Tsukuyomi gives you something holy, but blessing in the name of Piedron the Bagel Ogre just makes you a lunatic). It's super-effective against demons(though varying levels depending on the power of the demon), and vampires. 

It's also capable of harming supernatural beings in general, including ones immune to mundane weaponry.