Tall grass is the mechanism in the Pokemon series for meeting most of the pokemon. Some are meeted by other means, but most are by walking in and out of the tall grass. The dark grass has stronger pokemon, and maybe wild pokemon double battles, and the very tall grass has extremely strong pokemon.
It maybe possible for grass to be a pokemon spawner, albeit at a much, much lower spawn rate then dungeon spawners. Seagoingmanatee mentioned on the Pokemobs forums^ that Pokemon spawning would be adjusted to only spawn in caves or tall grass. In version 0.5, however, custom mob spawner is now used to spawn Pokemon and it is unknown if this mechanic will be used in the future.