The following was written in response to the question, "What is the difference between being 'under law' and 'under grace'?"
The intrabiblical tension between law and grace is one that I've struggled with a lot in the past. The Law (i.e. the old covenant) is presented in totally different ways in the Old and New Testaments. In the OT, the law is given as a blessing, a set of rules to live by. The Israelites are promised that if they obey, they will live by their obedience (Lev 18:5) and it will be their righteousness (Deut 6:25). They are also told that the commandments of the law are not too difficult or too far off, but are "in your mouth and in your heart, so that you can do it." (Deut 30:14) Numerous Psalms, especially 119, treasure the Law as a gift and a blessing to be celebrated. Everything seems peachy, until the New Testament.
The intrabiblical tension between law and grace is one that I've struggled with a lot in the past. The Law (i.e. the old covenant) is presented in totally different ways in the Old and New Testaments. In the OT, the law is given as a blessing, a set of rules to live by. The Israelites are promised that if they obey, they will live by their obedience (Lev 18:5) and it will be their righteousness (Deut 6:25). They are also told that the commandments of the law are not too difficult or too far off, but are "in your mouth and in your heart, so that you can do it." (Deut 30:14) Numerous Psalms, especially 119, treasure the Law as a gift and a blessing to be celebrated. Everything seems peachy, until the New Testament.
In the New Testament we learn that no one is declared righteous before God by observing the Law, only made conscious of sin. (Romans 3:20) Instead of a gift, the Law is now seen as a jailer that imprisoned the Jews under it, or at best a stopgap measure to hold us over until Christ came (Gal 3:23-24). The Law is revealed to have been weak and useless, making nothing perfect (Heb 7:18-19), its rituals incapable of taking away sins (Heb 10:4) as advertised (Lev 16:30). In Romans 10:5 Paul uses Moses' earlier promise that that the person who does the commandments will live by them to contrast with the "proper" kind of righteousness, the kind that is by faith.
This would all be well and good, except that God also gave the Law, which makes the gospel seem like a God-given solution to a God-given problem. It completely undermines the spirit in which the Law was given, making it into a burden rather than a blessing. It makes God's "chosen people" seem singularly unfortunate because they happened to live in a time before salvation by faith was revealed and instead got stuck with God's second-rate blessing, the Law, which doesn't save anyone. What is the point of the Law revealing their sin problem as in Romans 3:20 if they didn't live to see the solution? Commentators are quick to point out that this discrepancy is not because of a deficiency in the Law but because of our sinful inability to keep it, but was God unaware of this when He gave it, or taken by surprise? Placing moral burdens on people without helping them to carry them is what the Pharisees did, for which Jesus condemned them. (Matthew 23:4 What is going on here? How could God give the Israelites such a bad covenant deal and pass it off as a huge blessing—the covenant Christ has to deliver us from?
These are very tough questions and I definitely wouldn't say I have figured out all the answers. But I think one mistaken assumption in the questions is that the New Testament authors are making a "bad vs. good" contrast between Law and grace. I think a more fitting description of the two would be "good vs. much, much better". The key to seeing the Law as good, as I believe Paul and the author of Hebrews really did, is to stop seeing it as codified legalism—that is, as a covenant system designed to produce Pharisees. The Pharisees, including Paul (Phil 3:6), obeyed the Law perfectly—if all there was to the Law was doing what it says, they would have been "good" with God. But clearly they weren't.
The point has never been simply to do the right things, says the right words, and perform the right rituals to get into heaven, and God never told us to do so. This kind of legalism was just as much a perversion of God's Word before Christ as it is today. But there is another problem with legalism which is not synonymous with the Law, as it is just as easy to do with grace. This is treating the attainment of salvation from God as our be-all and end-all goal. Eternal life is not a "spiritual object" that God can wrap up with a bow and hand to us in exchange for good works, faith, or anything. Life is found not from Christ, but in Christ Himself (John 14:6). Eternal life is not something we receive from God, but simply knowing the true God (John 17:3). If we treat faith as something we "do" to receive a salvation that is not coterminous with knowing Christ, we may as well be legalists.
With all of this in mind, I can finally answer the question, what is the difference between being under law and under grace? It is not that we were stuck in a system of legalism and are now freed to receive our righteousness by grace through faith. This may be true of some Christians' experience, but God never commanded anyone to live this way so He could later get more glory by freeing them. What changes from Law to grace is not whether we know God or not, but how we know God. Through the Law God did provide a means of knowing and communing with Him, albeit a difficult, ritualized, and highly regimented one. The Law was also very communal in its role a the prototypical mediator between God and man; there was one tabernacle/temple for the nation where God was said to live, and where people would go to seek Him, and His commands were given on Mount Sinai for all the people.
But by grace we now know God more clearly in the person of Jesus Christ. So the book of Hebrews begins, "Long ago, at many times and in many ways, God spoke to our fathers by the prophets,but in these last days he has spoken to us by his Son, whom he appointed the heir of all things, through whom also he created the world." Whereas the Law was previously the mediator between God and man, we now have Christ (1 Tim 2:5). Through His death and resurrection we are able to know Him in ways of which the regulations of the Law were merely types and shadows (Heb 10:1). Though those under the Law could and sometimes did have a real relationship with God, by comparison with us they were prisoners. Now we ourselves are temples for God's spirit (1 Cor 3:16) and His word is written on our hearts instead of on tablets of stone (2 Cor 3:3). The precepts of the Law are fulfilled (or completed) through the grace shown to us by Jesus, who is the end of the Law (that is, the fulfillment of all it set out to do) for righteousness to everyone who believes (Rom 10:4).
Addendum: I can't help but wonder if the term "Law" underwent a semantic shift similar to what has happened to the term "religion" today. Whereas initially it referred to the old system of instructions by which Israel would worship and experience its God, by Paul's time it seemed to have become more synonymous with the onerous legalistic burdens laid by the "teachers of the Law", and it is this usage that Paul adopts in his writing about how grace releases us from the Law. Similar to how, today, people say that "Jesus came to abolish religion" which would have sounded absurd to a first-century Christian.
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