How can I remove this belly button scar?

I perform many of these belly button scar removals and the goal is to make the belly button as natural looking as possible. 

Frequently scars resulting from piercings are elevated and may be either keloid or hypertrophic scars ("proud flesh" scars). In this case, my sense is that you are describing a wound that may still be active as a result of picking or manipulation or may be on route to becoming a scar depressed below the skin surface.

If there is an active wound, this must first be treated until it heals completely. If indeed it is already a depressed scar, then a couple of simple techniques may yield gratifying results for cosmetically improving it. These are subcision, a procedure performed under local anesthesia, in which a needle is inserted under the scar to break up the fibrous bands that are pulling the scar down and to encourage new, healthy collagen formation.

To improve the surface of the scar, i have found medical microneedling using the Dermaroller, to be an effective technique. This method, also performed under local anesthesia (and often done at the same time as the subcision), uses a roller that contains numerous tiny needles, which leaves microscopic channels within the skin that break up firbrotic collagen, stimulate new collagen formation, and permit the increased absorption of agents that promote healing and reduce scar formation. It may also help to even out irregular pigmentation or hypopigmentation that typify most scars. 

For small scars, both procedures done together take no more than a few minutes to perform and require NO scalpel cutting or stitches.. 

It's hard to determine what the problem is but most likely you're looking at a scar created from your piercing.  Most likely, you would need to have a small surgical procedure (scar revision) to remove the "crater" that is offending you.  These procedures are usually performed under local anesthesia and can be done in 30-45 minutes in an office setting.  I recommend finding a board-certified plastic surgeon and going in for a consultation.  Good luck!