Initially, she was a little hesitant to touch the screen - probably because she expected things to be a more complicated. It took less than a minute to demonstrate the gesture based navigation and there she was browsing through my iPad picture library...
We later looked at some of her photo albums and I took pictures of the old photographs, which we transferred to the iPad via Camera Connection Kit. Isn't it amazing to see her playing the piano in 1938 versus 2010???
I did a very quick tour on some of the standard apps. She especially enjoyed painting and it was fun watching her curiously exploring the features.
The painting app also served as a good example for explaining the difficulties with the accuracy of touch based devices that she was experiencing in some of the apps (like we all do).
We spent hours playing Marble Mixer - a highly recommended multiplayer app for iPad demos with family & friend (Thanks for the hint, Stephan!).
Next day she said to me "Celia, when I woke up this morning I thought maybe we could play some more marble games tonight while we are watching the "Soccer World Cup" - and so we did. :-)
This was definitely a great start! If the entry prices were lower, I would probably get her an iPad with a nice collection of Granny specific apps...