Grunge is a form of design (usually for websites) emphasizing the pessimistic side of life instead of the optimistic. Quite popular on the amateur circuit of design (like somethingleet.com and endeffect.com), it is somewhat on the decline there, but is still quite common in proffessional design as well (the Resident Evil movie poster, for example, and many skateboarding advertisements).
More emphasis goes into borders of images than most forms of design (such as trendy or abstract). The borders are usually black and have a great deal of noise, with wispy tentacle-like shapes common as well. Fingerprints, smudges, and other distortions are also common. The entire point of having the border is make the viewer feel claustrophobic, like being in a dark cave, which deepens the emotional impact.
This is not to say, however, that the image itself is neglected; the border only strengthens the focus of the piece, which is usually something ironic, dark, or disturbing. A majority of the grunge photos are of a single color (like red or brown) or are sometimes sepia-toned. In addition, distortion like old film is common, such as dust and scratches, or distortion like old photographs, with warping, water damage, bends, and tears.
As for the creation of such an image, Adobe Photoshop is the tool of choice, and moreso than other forms of design, brushes are emphasized because they hasten the border creation process (noise, smudge marks, etc. can be easily made into reusable brushes, akin to rubber stamps). The displace filter is also commonly used (it is an integral part to the border building). The focus is usually a photo, as opposed to abstract art or typography, which means a camera is commonly used.
I have identified three forms of grunge, outlined below:
- Victorian grunge (usage of cursive fonts, sepia tones, and elegant, though no less dark images)
- Retro grunge (utilizes pictures of weaponry, explosions, '50s style logos/designs, usually antagonizes war)
- Modern grunge (resembles an FBI file or something similar, as in usage of fingerprints, stains, barcodes, typewriter fonts, photos, mug shots, etc.)
There are most likely more than this, but as I have found, most fall under one or two of the aforementioned categories.
For an example of grunge, one should frequent graphic design forums, such as SomethingLeet or thinkDan. Alternately, one could just /msg me... :) | 
