What does class here mean?
Does it mean blender will use this class as blueprint to create a instance object of bpy.types.Panel?
(I'm new to python and blender scripting.)
The syntax class DerivedClassName(BaseClassName): is for declaring a class DerivedClassName that inherits from BaseClassName. In the case of your code example VIEW3D_PT_monkey_grid inherits from bpy.types.Panel. More information about Python's syntax and concepts can be found in its docs.
The code does not instantiate an object from the class, it only declares the class. In order to use the panel VIEW3D_PT_monkey_grid you will have to register/unregister it in the register/unregister function. This is how objects for UI elements are instantiated in Blender.
This answer by p2or should give you a complete overview of UI creation through Blender's Python API.