Solder or connect it in some other way so that A and B are connected to digital 2 and 3 on the Arduino and the encoder common/ground pin is connected to Arduino ground/GND.

We'll use the USB cable from the computer - check that your pendant Arduino uses the same connector as your grbl Arduino or change the cable.

For the remaining four serial wires between the two Arduinos, you need to connect 5V and GND together. Then connect the grbl Arduino Tx to the pendant grbl softSerial Rx, probably digital pin 10. Do the same for grbl Rx to pendant softSerial Tx.

...then turn the encoder and see the motor spin. Adjust steps/mm etc to get the kind of response that matches your need and equipment.

Add your own macros of gcode, install fantastic user inputs, go over to github and fork a version that works for you.