This verse makes it clear that John is speaking of the grace of Christ replacing the grace of the Law. Paul, the writer of Hebrews, and John all talk about how the gospel supersedes the Law. Now we do need to understand that the Law itself was an instrument of grace. Moreover it still has relevance. The Law reflects the heart of God, its commands are good. Israel was blessed by having the Law. She would have been even more blessed if she had obeyed them a little more! But the Law increased sin (Rom 5:20). Not in the sense that it caused sin, but that it highlighted the reality of sin, the extent of our fallen nature.
The Law could not bring salvation. Jesus does bring salvation, grace and truth come through Him. So we see that John is teaching the same gospel with the same theology that Paul taught.
Note that this is the first place that the name of Jesus is used in the gospel. Up until now John has referred to Him as the Word. From now on it will be as Jesus. Note also the seamless transition. Jesus is the eternal Word who was with God from the beginning.
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