"Grandpa and Grandma wanted to be cremated after they died, not buried in the ground. Cremation means that their bodies were put in a room that was very, very hot until their bodies turned to soft, powdery ashes. We put their ashes into these (show the urns if that is what was done with their ashes) -- they're called urns. We keep these to remind us of Grandma and Grandpa."
Don't use the word "burned" when explaining cremation. Be very careful to make sure that your kids understand that their grandparents were not hurt by this process. If you wish to discuss the concept of soul with them, make sure that they are told that their souls do not "die" or turn to ashes because of cremation. If their ashes have been scattered or will be scattered, allow your children to attend this ritual or show them where the ashes have already been distributed. Of course, this is a tough concept for kids this age to comprehend but it's much worse to shield them from this ritual. For some additional discussion of dealing with the grief of your kids, I would recommend these two superb books:
Healing the Bereaved Child, by Alan Wolfelt
Talking About Death: A Dialogue Between Parent and Child, by Earl Grollman