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With legendary, you can reset a skill level without losing the perk points you got from the level ups you got from training it. You can then get additional perks from training it and leveling up again.
As pyscho said the legendary skills essentially removed the level cap since before it was added you would eventually hit a point where everything was maxed out and it was impossible to level up anymore.
You can add them to any skill.
Yes, you get refunded all the perk points you spent in that skill, so you can respend a bunch in that skill right away if you wanted. For skills like one handed and archery, it's a good idea because it increases your base damage if you invest in those damage perks to bring your damage back up. And chances are you're using a strong weapon, so your skill will level back up very quickly because it levels based on the base damage you do.
You just want to make sure not to legendary all your armor and offensive skills at the same time: you may find yourself a little weak.
It's also easy to level up some mage skills. If you spam Harmony on a bunch of animals once you have it, and spam Soul Trap on everything, you will level up Illusion and Conjuration quickly.
There's a good overview of legendary mechanics here:
https://en.uesp.net/wiki/Skyrim:Skills#Legendary_Skills
It's definitely not the most useful thing ever, but its nice for the folks that don't mind the extra grind for levels.