This document was probably a confirmation/verification paper for your grandmother, to be able to get a widow's pension.
An observer sat in the plane mostly to spot. The pilot had to focus on flying and shooting, and depending on the mission
the observer spotted enemy airplanes, even more important enemy fortifications or movements and ground targets to direct artillery fire.
The observer was equipped with a camera often, and armed with handguns/rifles, and later in war with rear mounted machine guns.
The paper also says your grandfather was awarded with the observers medal. To recieve the medal an observer had to
-fly at least 1000km in combat missions
-had to have a successful test in technical maintenance of airplanes
-had to have several reconnaissance missions behind the frontlines