There was contrived an episode featuring Grandpa's World War II memories, but it was scrapped due to Nazi symbolism.
The British Broadcasting Corporation press office says "Grandpa In My Pocket explores the hugely important relationship between grandchildren and grandparents by turning it on its head"
When Grandpa shrinks, mostly he's digitally special effected/composed in a big real background with Chroma Key (the greenscreen/bluescreen background effect) and sometimes 3D animated with Computer-Generated Imagery (usually when he runs very fast or jumps very high).
The third season changes the plot a bit, the Masons have moved to the Clay Windmill at "Clay Next To The Sea", Jason is now a teen and no longer the narrator and Grandpa has told Jason's cousin's about the shrinking cap.