A pangolin's scales are formed from keratin, the same fibrous structural protein that builds mammalian hair, claws and nails. They grow from the skin, wear at the edges as the animal digs and burrows, and keep growing through life. Between and beneath the scales the animal has ordinary hair, which is one of several reminders that pangolins are mammals rather than reptiles.
The scales overlap like roof tiles and are anchored so that a curled pangolin presents a nearly continuous armoured surface. That defence works well against big cats and is close to useless against a person with a sack, which is a large part of why pangolins are among the most heavily trafficked wild mammals.
The keratin chemistry is routinely misread. Because scale material is essentially the same as nail and hair keratin, claims that powdered scales treat particular ailments have no plausible mechanism. What remains genuinely uncertain is how quickly remaining populations can recover, since wild pangolins breed slowly and are notoriously difficult to keep alive in captivity.