What grace is and what it does (According to Scripture)

Attributes of grace:

1. comes from God, specifically Jesus (Prov 3:34, John 1:17)
2. free (Rom 5:15)
3. abundant (John 1:16, Rom 5:17)
4. it is a gift (Rom 3:24, Eph 4:7)
5. it is shared (Eph 4:29, Phil 1:2,7 1 Peter 4:10)
6. helps in time of need (Heb 4:16)

What grace does:

1. Saves (Acts 15:11, Eph 2:5, 2:8,
2. Reigns (Rom 5:21, Rom 6:14)
3. Labors (1 Corinthians 15:10)
4. Causes the giving of thanks to God (2 Corinthians 4:15)
5. Gives abundance for every good deed (2 Corinthians 9:8)
6. Is sufficient for weakness (2 Cor 12:9)
7. Strengthens (Heb 13:9)
8. Justifies (Titus 3:7)
9. Instructs us to deny ungodliness (Titus 2:11-12)

We can:

1. Grow in grace (2 Peter 3:18, 2 Tim 2:1)
2. Give grace to others (2 Corinthians 1:12)

As we see, God's grace towards us is quite simply His abundant affection for His children.  It's not some substance that can be used, it is not some edict that sin no longer matters, and it is not assurance that your life will be perfect.  In fact it seems that God tailors His grace to each of us (Romans 12:6) to accomplish His will in our lives and in the world. 

See Also:
Restraining Grace
It is mercy and grace even if it doesn't feel that way