Grenade is a special attribute that appears on some weapons (most notably, grenades). When invoked by a successful hit, it explodes in the spot targeted and every adjacent square (a 3x3 area) with a strong blast of sound damage. The damage may cause the confusion status. Like any invoke, attacks that miss cannot cause it, and the invoke will not trigger if the attack itself kills the target.
Grenade blasts cannot hurt the wielder, but can hurt anyone else in the blast radius, including pets and neutral NPCs. Be cautious when using a weapon that invokes Grenade. It's also advisable not to give your pets any weapons that invoke Grenade unless they're fighting alone in the Pet Arena or have a high Control Magic skill.