Grendel's symbolic function in Beowulf, explained so thoroughly by the other respondents, can be compared to that of the "beastie" or the "Lord of the Flies" in Golding's novel. Grendel might also be compared to the creature in Frankenstein. Some psychologists, such as Jung, would consider all of these monsters as the archetypal "other"--anything outside the self but hanging on to it nevertheless--the archetypal "shadow self" of each of us. In the case of this literature, the "other" or "shadow self" is that part of the hero which he denies, a representation of that part of him he most fears, but as Jamie explains, the part that also enables the hero to become what he is.

I thoroughly agree with the answers above, but want to add that Grendel is integral to  Beowulf achieving his status as an epic hero. 

Joseph Campbell, in his classic work, The Hero With A Thousand Faces articulated the phases in which the hero must go through in order to be considered worthy of the title.  Here are a few of the key steps in which Grendel "helps" Beowulf: 

 ·  The call to adventure or to a quest for identity and the realization that the hero or heroine has special duties or responsibilities in this world.

·  Revelation of the nature of the hero or heroine's true identity and birthright and their special responsibilities.

·  The discovery of personal virtues and strengths and usually at least one great weakness.

·  The discovery and development of special powers which are unique to the hero or heroine.  These are often gifts from the gods or other powerful beings who the hero or heroine has assisted, and such gifts usually compensate for the weakness.

·  An arduous physical or psychological journey fraught with trials, testing and temptation.

·  Ultimately the hero or heroine must rely on his or her own strength, wits and resources to emerge victorious.

 Without Grendel, there would be no Beowulf. Grendel is the first and arguably toughest test for the hero.

I think Grendel is the archetype of evil.  He is said to have come from the biblically cursed line of Cain, from which all manner of monsters have sprouted.  Described as a fiend from Hell, he has superhuman strength.  He comes at night, out of the darkness and the unknown dark waters.  He is slimy (he lives under water). He eats human flesh.  He can easily be compared with the Cyclops encountered by Odysseus, the Giant from Jack in the Beanstalk, or the Philistine, Goliath.  Grendel was the epitome of evil as poet understood its nature. 

Good question. Grendel can be read as several different archetypes.

Grendel is the monster, which in psychological terms would be anything we cannot face: evil, the shadow, the id, etc.

Grendel is the other: the unknown who we never really understand.

Grendel is animal hunger, which bursts the limits of civilization.