There are two opposing views of grace and they stand in direct opposition. They are not complimentary, they are competitive. One cannot prosper without destroying the other.
In the one view, grace is a mechanism by which Christ made it so that the atonement serves as a proxy for righteous behavior. That is different than forgiveness on condition of repentance. In this view grace serves as a proxy substituting even for our current flaws and failings. This interpretation was initiated by Martin Luther. It tends to be taught using phrases like “Christ already paid the bill in full” and is the underlying view of the atonement in protestantism. It is through this lens that Paul’s words are read in protestant religions.
But viewed correctly, grace is simply the merciful gifts of God. Some of them came by the atonement, others, such as the creation, and the gift of a moral body, came independent of it. While it is true that many of God’s gifts are given on condition of obedience, that doesn’t mean that it is our works that bring it to us. That is outside our mortal power. I can live so the Holy Ghost will choose to attend me, but that is different that saying that by my own mortal abilities I have forced the Holy Ghost to attend me. The Holy Ghost is a god. He will do as he sees fit. And if he attends me when I am righteous, that is a merciful gift, not something I did by my own mortal power. It is simply a merciful gift, gifted to me on condition of obedience. This grace comes into our life in recognizable ways that are fundamental parts of our doctrine. The light of Christ is a manifestation of the grace of God. If we follow if, then it leads to the grace of baptism for remission of sins, and to the grace of the gift of the Holy Ghost. These examples of grace can transform our works. They cannot transform the fact that our power is meerly that of mortal men. But they can transform our works, which is essential to us, because it is by our works that we will be judged. The resurrection, and sealing to an eternal spouse are other examples of this grace. It is outside our power as mortals to bring ourselves forgiveness, the light of Christ, the Holy Ghost, resurrection from the dead, eternal sealing, or exaltation. That does not mean they are not conditioned on obedience, it means they are outside our ability to grant to ourselves. We are saved by grace, after all we can do.
In short, contrasting the two, in the protestant view of grace Christ’s atonement not only provides forgiveness on condition of repentance, but also provides proxy righteousness substituting even for our current failings and flaws.
But in the correct view, grace is something that is more manifest in our lives as we obey more. It is God’s merciful gifts. It is God’s power exercised in our behalf as a merciful gift. Instead of making future promises about the judgment bar, it transforms our works now. We know when we do service, for example, that we feel a spiritual lift. We have no power to grant that to ourselves, but God does so as a merciful gift. In that enlightened state we can see truth more clearly, and we can submit our will more fully to the will of God. This sort of grace connects us with heaven here in mortality, and thereby changes our works, most particularly by helping us grow into the gift of the Holy Ghost. Rather than standing as proxy righteousness in place of misbehavior, real grace requires us instead to change our behavior to experience more of this grace. This fits with our own experience with the Holy Ghost. We grow into it more as we live better, and as we have the Holy Ghost more with us, then in turn it is easier to live better. There is no substituting for misbehavior with the Holy Ghost. When we do wrong, he leaves. And that is how the grace of God really works.