Translation:She finds her grandmother's letters.
"Su" means "his," "her," and "your." (Your/his/her shirt = Su camisa.)
"Sus" means "their." (Their shirts = Sus camisas.)
EDIT: "Sus" can also mean your/his/her, when the article mentioned is plural. (Her shirts = Sus camisas.)
You just have to pay attention to the context to know who and what it's about, and then you'll be all set. :)
So then I guess it's pretty simple; "su" can mean any singular reference to an article under possession, and "sus" can mean any plural reference to the same. (Su falda = your/their/his/her shirt. Sus faldas = your/their/his/her shirts.) Context becomes very important with these words.
EDIT: A bit of an expansion on the importance of context.
Looking at the context, we would know that if I say, "Mi madre come su fruta," my mother eats "her" fruit.
If I say, "Mi padre come su fruta," we know that my father eats HIS fruit; "su" therefore means "his" in this sentence.
If we said "Mis padres comen su fruta," though it is still singular, "su" refers to "their" fruit.
"Mis padres comen sus frutas y vegetales" would mean that my parents eat "their" fruits and vegetables (plural).
Hoping this makes at least a little sense. Sorry for the lengthy comment!