Grandpa Spencer is Shawn's grandfather and Henry's father. He makes his only appearance in a 1987 flashback in S2E12 "The Old and the Restless", where he advises Shawn not to take his father too seriously and occassionally take the time just to enjoy life. Given that he is never seen or mentioned as alive outside of this flashback, it is safe to assume that he died before the events of the show.
In S3E4 "The Greatest Adventure in the History of Basic Cable", Henry tells Shawn that he inherited his love for pennies from his father.
