An old man was sitting surrounded by his grandchildren.

Literal

Old-man [subject-が] grandchildren [by-に] surrounded sat-was.

A warm family scene. 孫たち ('grandchildren') uses the plural-marker たち after 孫 ('grandchild'). 囲まれて is the passive of 囲む ('to surround'), framing the old man as the one being encircled. The image evokes the multigenerational warmth that Japanese family ideals often celebrate.