To pound sand is to engage in a futile, meaningless activity, with no real end results.
The expression is used to send someone away, to perform a task that will keep them occupied.
It is mostly rude to send someone away to “pound sand” as it conveys feelings of irritation from the speaker.
Originally, the phrase was part of a longer idiom; “To have enough sense not to pound sand down a rat hole.”
This expression reflects on the uselessness and stupidity of the act of pouring sand into a hole, filled with tiny rodents who are famous for their mobility.
“Pounding sand” was used as far back as 1912, but the idiom is most likely retaining a longer history in its use.
It is mostly encountered in the Midwest United States.
“Pounding sand” today is more of a regional expression in the decline, only remembered by a fragment of the people, who used it during history.
Urban Dictionary has a number of entries on the subject, the earliest one dating back to 2003.