1. Not only federal, but also state, county, and municipal governments have the power of eminent domain.

2. Eminent domain was initially used to take private land for public use (e.g., roads, schools). In recent years eminent domain use has expanded to take private land "for public purpose" (e.g. to sell to developer to revitalize a downtown district).

3. There's plenty of case law on the latter. Google "Kelo v. City of New London".