There is an excellent post about this on the jqGrid Forum.
Essentially you can do what Mano suggests and modify the css file directly, or you can create your own in-line style if you need more flexibility. For example:
.ui-jqgrid {font-size:0.8em}
If you do create an inline style you may need to make it more specific to pick up grid rows:
.ui-jqgrid tr.jqgrow td {font-size:0.8em}
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