Why there's a crescent moon over lord Shiva's head?
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Its related to the Daksha's shrap and origin of Somantha jyotirlingas:
Twenty-seven of Daksha’s daughters were married to the moon-god Chandra. One of these wives was named Rohini and Chandra loved Rohini more than he loved the other wives. The other wives felt neglected and they complained to their father. Daksha repeatedly warned his son-in-law to devote himself equally to all twenty-seven wives. But Chandra was in no mood to listen. Daksha thereupon cursed Chandra that he would gradually fade away. Chandra didn’t know what to do. He went and sought advice from Brahma and Brahma told him that the only rescourse was to pray to Shiva. Chandra went to Prabhasa tirtha and made a linga on the banks of the river Sarasvati. He prayed to Shiva for six months.
At the end of the tapasya Shiva appeared before Chandra and offered to grant him a boon. Chandra explained what the problem was. Well, said Shiva, Daksha’s curse cannot be entirely ignored. Let us have a compromise. During krishnapaksha you will wane. And during shuklapaksha (the bright part of the lunar fortnight) you will wax. That should satisfy everybody. Chandra was delighted.
The linga to which Chandra prayed is Somantha, the first of the jyotirlingas. Shiva is always present at that tirtha. (Source:dharmakshetra.com)
Somantha means the "Protector of the Moon God". Legend has it that the first temple at Somantha was built by Chandra Dev himself.
After curse, Moon started losing it's luminescence each day , it got afraid and ashamed and thereafter disappeared into the ocean. As a result of this,there were many herbs which require the light of the moon to grow, which started suffering in the absence of the moon.
Moreover , due to the moon disappearing in the ocean, there was a lot suffering in the entire world and it was to end this problem only that the celestials advised the moon to take refuge in the Lord Shiva, and left with only one kala, he took refuge in Lord Shiva. Being the graceful Almighty, Lord Shiva wore the moon crescent on His head, making him grow for 15 days and decay for 15 days periodically.
The waxing and waning of moon was used to calculate the days and months in earlier times. Thus, the moon symbolizes time and Lord Shiva wearing moon on his head denotes that Shiva has complete control over time and is beyond the measure of time and is eternal. There is also an interesting incident behind the waxing and waning of moon.
Chandra was once cursed by Ganesha to lose his light gradually. And the curse was reduced, upon Chandra's prayer, and he was made to wax and wane, each phase lasting for 14 days (Refer this answer).