Basically, self-distancing is changing one's perspective on a given traumatic event or situation, in which, instead of living or re-living that event in the here and now, a person through the power of their mind, essentially stands back from their own self, and takes on therefore the guise of a third person perspective, so that the event is no longer seen as being strictly personal, but rather has morphed into something that is perceived as impersonal. Those that are successful at self-distancing are able to essentially take something that is real and by the virtue of their stepping away from the here and now, are able to distance themselves in a manner in which they are able to achieve perspective, and hence, are less stressed about how a given event unfolded.
Self-distancing does not have anything to do with denying what has occurred, it merely is an aid for the benefit of that person, that makes it far easier to thereby not overreact and therefore to not suffer undue anxiety about a situation that perhaps may be overwhelming, in that moment. In other words, when people have suffered a mighty blow to their psyche, such a blow can be quite debilitating; whereas, by the usage of self-distancing, a given person is able to take such a blow and is far better at discerning that things are probably not nearly as dire as they might appear to the emotionally overwrought.
In point of fact, far too many people, take themselves far too seriously, in which, for instance, arguments often blow up to insane proportions, simply because neither party, will consider backing off, and thereby self-distancing themselves from the situation -- therefore, continuing to intensify what doesn't need to be intensified. The whole point of self-distancing is to calm things down, which is something that is going to occur at some point, anyway; and the sooner that this is done, the less the damage that will be done, for far more damage is done by those that are too wound up, to recognize that they have lost control of their good mind.
So too, people have a tendency to beat themselves up about things that they regret doing, or have had happen to themselves, in which they re-live these tragic events, over and over again, in which, the re-living, doesn't seem to resolve much of anything or serve to reduce the tension so felt. A far better way, though, to address regretful and tragic actions, is to practice the art of self-distancing, in order to gain that perspective that will help still the terrible winds of wrongful things so felt; and will aid in the clearing of our minds of the wrong belief that we can never escape a mindset of being trapped forever in a particular place or time.
Remember this, forgiveness, practiced correctly, is really the art of self-distancing and therefore the obtaining of the proper perspective on that which is being forgiven. After all, forgiveness is the letting go of former things and self-distancing is akin to the pathway to the very same thing.