Answer :
Phoebe does not reveal to grandfather that Nadia's parents are from Karachi, Pakistan. She describes Nadia as an American just like her. Phoebe expected him to remind her again that she is Greek not American. But grandfather looked at the photo again and said "Pretty Girl." Then he looked at Phoebe and his attitude towards her softened like he had accepted that Phoebe was more of an American and less of a Greek. In that caring expression, Phoebe realized that her grandfather loves her and he wants to share his culture, tradition and values with her. Grandfather wants Phoebe to be proud of her heritage. The tension between Phoebe and her grandfather gets resolved and she starts feeling more comfortable in Greece.