In studying satire in John Gardner's Grendel, consider first the definition of satire. In a literary piece, it is...
...the use of humor and wit with a critical attitude, irony, sarcasm, or ridicule for exposing or denouncing the frailties and faults of mankind’s activities and institutions, such as folly, stupidity, or vice.
Where a parody is a form of softer criticism, satire is harsh in nature—easily seen in the human faults and/or shortcomings the satire addresses.
Grendel, the villain in the epic Anglo-Saxon poem, Beowulf, is brutally critical of humans and the things they value.
Consider the scop—the poet or storyteller—known as the Shaper. With fantastic words, he spins tales of the heroics of mighty warriors, a reflection of what that society values among its men—violence visited not only upon Grendel, but upon each other. Violence is nothing to esteem. So Grendel makes light of the use of words to convey violence as glorious feats of courage. Grendel says:
I couldn't go on, too conscious all at once of my whispering, my eternal posturing, always transforming the world with words—changing nothing.
We can draw the inference that humans use words to transform meaningless or valueless stories of life into grand accounts of heroism and glory. In essence, the character of Grendel may be speaking of the tall tales that are recounted, in which undesirable behavior can be transformed with words to reflect actions seemingly honorable and courageous. The monster is saying that the telling of a great story does not change the truth.
Gardner's description of the dragon seems a satirical attack against the person of God—perhaps organized religion. The creature's cynicism reflects attitudes that some humans might have of God. (Grendel himself has little regard for the monks and their beliefs in a Higher Being—in that they are mired down with sin and imperfection.) The dragon says:
"I know everything, you see...The beginning, the present, the end. Everything. You now, you see the past and the present, like other low creatures...But dragons, my boy, have a whole different kind of mind." He stretched his mouth in a kind of smile, no trace of pleasure in it. "We are from the mountaintop: all time, all space. We see in one instant the passionate vision and the blowout.”
The vision here is of all-seeing, all-knowing God that has no love or sympathy for the world, but looks down upon mankind like pitiful mistakes with limited capacity. The smile is not one of humor or joy. This perception or take on God may provide the idea that religious people pretend to have fervor and passion for godly things, but everything they do leads to complete failure. One could assume that Gardner has little time for those who speak of God's goodness, while failing to live out the deep commitment they feign.
This idea is supported further with the following quote that speaks specifically to the failure of theology—man's "study of religious faith, practice, and experience: the study of God and God's relation to the world"...
Theology does not thrive in the world of action and reaction, change: it grows on calm, like the scum on a stagnant pool. And it flourishes, it prospers, on decline. Only in a world where everything is patently being lost can a priest stir men's hearts as a poet would by maintaining that nothing is in vain.
Ironically, Grendel's words seem contradictory: while theology (he says) does not come from movement ("change") but instead is like stagnant [unmoving] water, he then notes that it "flourishes…prospers." He would have the reader believe that "decline" generates movement and change, even though he insists theology does neither. He compares it to poetry…once again a reference to the emptiness of words. As a writer, Gardner might well feel that words do little to move the heart of a human being, especially where God is concerned—that it is not the words that are important.
Finally, Grendel's words challenge the need to have meaning in one's life:
Stars, spattered out through lifeless night from end to end, like jewels scattered in a dead king's grave, tease, torment my wits toward meaningful patterns that do not exist.
Throughout the story, Grendel finds fault with all things related to the human experience. As an outcast, he studies what he cannot have, and disdains it because the human world has no room for a creature like him. Perhaps Gardner is finding fault with people who look for meaning where there is none. For example, jewels are meaningless to a dead king. The stars, miracles lighting the night sky, should be wondered at, perhaps even pondered. But like one in the grave, things of value have no meaning. It may well be that the author is finding fault with the casual attitude people have to the very things that should inspire them and ask them to question how they fit into such a wide universe "spattered" with "scattered" stars. However, it would seem that these wonders are lost to those who are perhaps searching for jewels when they should be searching for "meaningful patterns" that can only be found by a human being.
With this said, it may be that Gardner (using Grendel) through satire is telling the reader that the things most people acclaim, such as violence, theology and wealth, are not what they should be exalting, but rather things such as truth, love and an existence based upon being truly engaged in life.