When Shotgun's open coffin is on display in Grandma's house, there is "a heavy" white gauze hanging from the open coffin lid. A gauze is semi-transparent material, made of silk, linen or cotton. The gauze is hung from the coffin lid to "veil" or obscure the dead body. Gauze is sometimes used in this way to protect the dead body from flies and other insects. Gauze can also be used in this way to soften the sight, and thus the shock of a dead body.
Later in the story, the gauze is important in a dramatic sense. The guests in Grandma's house see the gauze ripple "as if a hand had passed across it from the other side." Grandma also sees this movement and immediately picks up her shotgun. She takes aim at the gauze and fires. The white gauze becomes "black rags" and the lid is almost blown off of the coffin. Grandma says that she fired because she assumed that Shotgun had come back to life. Of course, this isn't really what had happened. It turns out that the cat had gotten into the coffin and had snagged the gauze with its claws. Nonetheless, from this moment on, Grandma is known as the woman who shot at a dead man who had tried to come back to life. This is one of many stunts that Grandma executes throughout the story to create a fearsome, mythic reputation for herself.