This was (along with other things) used to avoid regulations banning racial segregation of schools (since neighborhoods were already segregated due to policies like redlining).
When people perceive one school to be better than another, they may use various forms of fraud to get their children into the school; using the grandparent's address is common (since grandparents may own a house in the suburbs while the parents are younger and live in an apartment in a poorer neighborhood).