In a Two-Headed Giant game, the activated ability of Angel of Grace causes you to gain or lose life so that your team's life total becomes 10.

If you have less than 1 life and somehow haven't lost the game, damage dealt to you reduces your life total further below 0 (as normal).

In a Two-Headed Giant game, after resolving Angel of Grace's triggered ability, damage dealt to you and/or your teammate that would reduce your team's life total to less than 1 reduces it to 1 instead.

Angel of Grace's triggered ability doesn't stop loss of life from effects that say that you lose life.

In a Commander game, combat damage you're dealt by a commander is still tracked, even if it doesn't change your life total.

For a player's life total to become 10, that player gains or loses the appropriate amount of life. For example, if your life total is 2, Angel of Grace's last ability will cause you to gain 8 life; alternatively, if your life total is 20, it will cause you to lose 10 life. Other cards that interact with life gain or life loss will interact with this effect accordingly.

Angel of Grace's triggered ability doesn't prevent damage. It only changes the result of damage dealt to you. For example, a creature with lifelink that deals damage to you will still cause its controller to gain life, even if that damage would reduce your life total to less than 1.