Obachan is a Japanese word for "grandmother." The word is usually written as Obachan to distinguish it from the word for "aunt." They sound almost exactly the same save the longer "a" sound for grandmother. The -chan suffix indicates familiarity and a casualness to the relationship. Grandma may also be seen as "Obaasama" (very polite and formal) or "Obaasan" (polite standard address.)
One draft of the script of the episode spelled the term as "Obaachan", with a pronunciation guide of "oh-BAH-chon (second syllable 2.8 times longer than the others)", while the final draft spelled it as "Obachan".