I would like to start this question by making it clear that I am not trying to start an argument here and I am certainly not trying to downplay the injustice of the victims of the Salem Witch Trials.
As far as I am aware (and I am not a historian so I apologise for any inaccuracies), altough acusations of witcraft or werewolf sightings date back centuries, the main Witch Trial craze occured in europe in the late 16th and early 17th centuries, much of it inspired by the counter-reformation and the infamous handbook the Malleus Malleficarum (which was actually published nearly a century ealier in 1487). According to wikipedia, between 1580 and 1630 aproximately 50,000 people were excecuted as witches, 80% of them women. As a british person I am personally most familliar with the trial of the so-called "Pendle Witches" in 1612, and the campaign of the infamous "Witchfinder General" Mathew Hopkins during the english Civil War.
However, despite the countless acts of injustice commited during this time, it is actually a comparitavely minor event, one that happened 50 years after the end of the craze, that has become synonymous with Witchcraft in the modern psyche.
So what was it that led to the Salem Witch Trials becoming so incomparably famous. Why is it that Salem is such a pop-history phenomenon when really it was little more than a footnote of a much larger event. I dont mean to be dissmissive of Salem or the men and women that suffered there, but I would be very interested if someone could shed some light on which events and which movememts elevated the Salem Witch Trials from a relatively minor incident in a an isolated colony into the textbook Witch Trial.
The basic answer is that the people writing American history textbooks in the 1790s hailed from the Boston area and considered themselves to be descendants of the Puritans specifically. Because of this, they wrote glowing biographies of Increase Mather and Cotton Mather, portraying them as bringing enlightened liberal education and classical philosophy to the young colony. This led them to set up the Salem Witch Trials as a morality tale about the excesses of the past: Cotton Mather fell prey to either superstition, or uncontrolled zeal for persecuting heretics, or bad habits of "European" mob rule which had produced so many witch trials over there, like the Pendle Witches example you mentioned. Salem was not the only witch trial in America but it was unusual enough that it was a remarkable thing for Puritans to do.
Because so many different causes could be invoked for the Salem trials they were invoked in all sorts of different situations, for example by Mormons and Catholics decrying persecution, or scientists preaching against unreason. Even into the early 20th century, people were still writing passionate defenses of Cotton Mather, which had to apologize for his role in the witch trials from a philosophical perspective; others, of course, used the witch trials to lambaste Mather or the Puritans generally.
There was no single retelling that made Salem the most famous example. It was the shared memory of Boston-area intellectuals, the superior position of Boston in early intellectual life of the colonies, and the complex cultural situation which produced the trials themselves. As for why Salem became world-famous, that's sort of the story of American soft power; since one of the intellectual arguments was about America vs. Europe there is no particular reason why the story should have been imported back into Europe, but culture works in odd ways sometimes.
Gretchen A. Adams has written an entire book about this, The Specter of Salem: Remembering the Witch Trials in Nineteenth-Century America (2008) from which this answer is drawn.