Warning: Wikipedia contains spoilers.
Charlie's grandparents -- George and Georgina on his mother's side, and Josephine on his father's (because Grandpa Joe came with Charlie to the factory in the previous book) -- are nervous about being inside the travellingelevator from Wonka's chocolate factory. Georgina reaches out from the bed the grandparents have been in for twenty years and grabs Wonka as they're preparing to descend and strands the elevator with its occupants in earth orbit. The elevator drifts until Wonka sees the chance to link it with the Space Hotel, a private enterprise of the government of the United States.
In the White House on Earth, the President of the United States and his Cabinet see this mysterious object approaching the Space Hotel and think it's hostile. The approaching space shuttle containing the hotel staff and three astronauts is being left behind by the mysterious object, and the shuttle's crew prepares for the worst. On the Hotel, Wonka and the others hear the President address them as Martians, and they realize they have to keep up the charade or be arrested. But then they open one of the hotel's elevators and find a brown, wriggly creature pointed like an egg. It and four others like it begin to change shape, and Wonka motions everybody to get out quick.
Those shape-changers, Wonka tells them, are predatory extraterrestrials called Vermicious Knids that want to use the Space Hotel as a base from which to invade Earth. Since they can't reach Earth's surface because they burn up in the atmosphere as shooting stars, the Knids are waiting in the Space Hotel for the new arrivals, most of whom they devour. In addition, they disable the shuttle's rockets so the survivors can't return to Earth.
Charlie suggests that they use the Elevator to tow the shuttle in, and while they're locking a steel rope onto the shuttle, one Knid begins to wrap around the elevator and form a chain with its fellows. In a burst of inspiration, Wonka activates the Elevator's retro-rockets and brings them, the shuttle, and the now-frying Knids into the atmosphere. Releasing the shuttle, Wonka redirects the Elevator to re-enter the chocolate factory at the same point they left.
Since Charlie was presented the factory as a gift by Wonka, he wants his family to help him run it. But George, Georgina, and Josephine refuse to move out of their bed. Wonka proposes a pill he invented, Wonka-Vite, to make them young again. However, the three bedridden recipients get greedy and take much more than they need to. Instead of becoming a mere twenty years younger, the three grandparents lose eighty years, making George one year old, Josephine three months, and Georgina minus two (she was seventy-eight). Charlie and Wonka make the journey in the Great Glass Elevator to Minusland to get Georgina back with Vita-Wonk, a sprayable compound that makes people older. Then they figure out how much Wonka-Vite they must give her to get her back to her correct age.
The grandparents, now restored to their proper ages, are still incensed with Wonka's adventurous nature. The Oompa-Loompas then come in and give Wonka a letter from the President, congratulating the occupants of the Great Glass Elevator on saving the lives of the shuttle astronauts and hotel staff and inviting them as the guests of honor to a White House dinner. The grandparents don't want to be left out, so they leap out of bed and join Charlie, Grandpa Joe, Wonka, and Charlie's parents to enter the helicopter sent to pick them up.