Formal:
* ¿Qué está haciendo, abuela? (This is the most formal and polite way to ask.)
Informal:
* ¿Qué haces, abuela? (This is a more casual and familiar way to ask.)
You could also use "¿Qué andas haciendo, abuela?" which is slightly more informal than "¿Qué haces?" but still respectful.
The choice of which phrase to use depends on your relationship with your grandmother and the situation.