(2 syl.) means in “Grotto style.” Classical ornaments so called were found in the 13th century in grottoes, that is, excavations made in the baths of Titus and in other Roman buildings. These ornaments abound in fanciful combinations, and hence anything outré is termed grotesque.
Source: Dictionary of Phrase and Fable, E. Cobham Brewer, 1894
More on Grotesque from Infoplease: