The above post is very informative and gave me information that I didn't know about.
From what I know, those who are known to have lived extremely holy lives, are basically venerated (honored) highly in their life, and then when they pass on, they are honored more for finishing the race of Faith.
Eventually when enough people honor a person, the Church canonizes them as a saint. This is how it happened with the New Martyrs of Russia. During the Communist persecutions millions were martyred...but in local places, the Churches began to venerate certain people who had lived extremely holy lives, or had shown great Faith and accepted martyrdom. It may have been an important lay leader of the Church, or even a deacon of priest. After their death, the whole congregation honored them for their faith. Their story would then be told to other Churches and so on and so forth. Finally with the fall of Communism the Church could openly declare these people as saints.
Another example is in the Coptic Church. Their last Pope, Pope Kyrillios (sp?) who passed on about 30 years ago is highly venerated by the Faithful. He was given the gift of healing, performed miracles and lived a very holy life. Most Copts consider him a saint because he lived a saintly life. Though officially he has not been canonized as of yet. (because in the Coptic Church I think a person must be 'dead' 50 years before canonization)
Anyways, in all these cases these people are saints because they lived holy, saintly lives, or accepted martyrdom or passion or all the above. They are saints when alive. In the case of Pope Kyrillios, many Copts ask for his prayers privately, though Liturgically this can't be done. Canonization is basically a stamp of approval by the Church to invoke a particular saint during the Church services. As the above post said, it doesn't mean the person is made a saint, or becomes a saint at that point. They are already a saint, whether they have been Canonized or not. Canonization is just an official approval by the Church, to what is already known.
At least thats my understanding of it...I could be wrong.