Nearly all of the major groups talk of salvation by grace and it means, usually, whatever the holder of the view thinks it means. Because I believe there is no grace save sovereign grace, I use the term and dedicate my own ministry, unprofitable as it is, to the expounding of sovereign grace and to the calling of the ministry back to similar action. One of the attributes of God is goodness. The goodness of God is the divine essence seen as energized benevolently and kindly toward the creature. Mercy and grace are varieties of God's goodness.
Grace has reference to sinful man as guilty, while mercy has respect to sinful man as miserable.
I will be gracious to whom I will be gracious, and will show mercy on whom I will show mercy. God is necessarily good in His nature, but free in His communication of it. A sovereign God exercises mercy and grace as it seems good to Him. At that time Jesus answered and said, I thank Thee, O Father, Lord of Heaven and earth, because Thou hast hid these things from the wise and prudent, and hast revealed them unto babes. Even so, Father, for so it seemed good in Thy sight.