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When and how are pardons supposed to be used? Why does the Constitution even grant the president the power to pardon? Can it be used to pardon any crime?

On the surface, it seems to make the president above the law. CNN just reported that president Trump promised to pardon the head of CBP if he broke the law. It would seem the president could just do this for any law or policy he doesn't like and thereby bypass Congress or the courts.

Presidential pardons can be used to pardon someone for any federal crime, if you are convicted of a state crime, the governor of that state has the right to pardon you. Impeachment is the only instance where the constitution prohibits pardons.

Of the founding fathters, Alexander Hamaliton was the most supportive of Pardons and wrote about the need for them in the Federalist Paper No. 74. The idea behind them was that some situations negate the need to punish someone or to punish them severely.

The criminal code of every country partakes so much of necessary severity, that without an easy access to exceptions in favor of unfortunate guilt, justice would wear a countenance too sanguinary and cruel.
http://avalon.law.yale.edu/18th_century/fed74.asp

Some people do view some pardons as inappropriate because they take away the ability of the courts to enforce their rulings. Who gets one is in the discretion of the President though.

If a President uses pardons too freely, and in what seems to be a corrupt manner, Congress could, in theory, impeach the President and remove him or her from office. This has never happened. How likely it might be in future is more a subject for the politics forum.

A pardon cannot immunize a person from an individual damage suit, or even from a later governmental civil penalty, only from a criminal prosecution.

A President probably cannot pardon himself (or herself). We can't be sure, no US President has ever tried, so no court has ever ruled on this. Gerald Ford's pardon of Nixon is as close as the US has gotten to such a case.

Pardons, like most governmental powers, can be abused. There are various checks to try to deter and limit abuse, but they are not perfect. If the President (or any high official) is abusive, powers will be abused.

The constitutional power of the president to grant pardons is copied from the power that the King of England had to grant pardons. Federalist #74, as Putvi points out, justifies the power and its scope at some length.