What is Grindhouse (2007) and how to watch it?

What is Grindhouse and how to watch it?

The term "grindhouse" purportedly derives from "bump and grind" burlesque theaters and means, "a low-budget film theater that shows primarily exploitation films" so I suppose you should watch it in a low budget theater ;)

Is Grindhouse just two separate movies (Planet Terror and Death Proof) sold together as a double-feature?

Yes, but the double-feature also includes some extra material apropos to the "Grindhouse theater" experience.

If so, what is the preferred order in which to watch them?

You can watch either independently, but...

The double feature consists of two feature-length segments, Rodriguez's Planet Terror and Tarantino's Death Proof, and is bookended by fictional trailers for upcoming attractions (though two of the trailers, Machete and Hobo with a Shotgun, have since been made into movies), advertisements, and in-theater announcements.
per wiki

For completeness' sake, the Grindhouse double feature contains:

• Machete (trailer, since turned into an actual movie)

• Planet Terror

• Werewolf Women of the SS (trailer)

• Don't (trailer)

• Thanksgiving (trailer)

• Death Proof

• Hobo with a Shotgun (trailer, since turned into an actual movie) - in my version of Grindhouse, this trailer doesn't exist. Maybe it is only on extended versions? Can someone confirm?

Regarding order, you can just follow the above presented order, as intended by the movie directors, and either movie can also be watched independently.

However, Death Proof happens chronologically before Planet Terror (at least, the first part of the movie), and they exist in the same universe. This can be seen by the line in Planet Terror where

a song is playing on the radio in loving memory of Jungle Julia.

There is no required order, other than the order they are presented in, as they have nothing in common...which would be the directors' [Rodriguez & Tarantino]intent as this is specifically intended to be a homage to the low-quality/exploitation films that were usually shown in Grindhouse theatres.

Films shot for and screened at grindhouses characteristically contain large amounts of sex, violence, or bizarre subject matter. One featured genre were "roughies" or sexploitation films, a mix of sex, violence and sadism. Quality varied, but low budget production values and poor print quality were common. Critical opinions varied regarding typical grindhouse fare, but many films acquired cult following and critical praise.

Wikipedia

A grindhouse is an American term for a theater that mainly shows exploitation films. According to historian David Church, this theater type was named after the "grind policy", a film-programming strategy dating back to the early 1920s which continuously showed films at cut-rate ticket prices that typically rose over the course of each day.

Church points out the primary definition in the Oxford English Dictionary is for a movie theater distinguished by three criteria:

• Shows a variety of films, in continuous succession

• Low admission fees

• Films screened are frequently of poor quality or low (artistic) merit

Church states the first use of the term "grind house" was in a 1923 Variety article, which may have adopted the contemporary slang usage of "grind" to refer to the actions of barkers exhorting potential patrons to enter the venue.

Double, triple, and "all night" bills on a single admission charge often encouraged patrons to spend long periods of time in the theaters.