Small Grid
Space Engineers grids can be mobile Small Grids, mobile Large Grids, or Stations.
Small Grids are small light-weight mobile craft used for short range travel or for fighting against other small ships. Being more maneuverable than large-grid ships, small-grid craft are a key stepping stone in survival as they are capable of transporting the player in a method safer than the jet pack, provide life support, and are able to do activities such as fighting, mining, or repairing.
Examples include rovers, race cars, busses, atmospheric jets, space shuttles, repair drones, miners, cargo haulers, fighters, walking mechs, camera drones, PBWs, and so on.
Small Grids are made of Blocks about 1/125th (0.8%) the volume of Large Grid and station blocks. That is, the small-grid base unit is 0.5m rather than the large-grid 2.5m. This does not mean that the mass and costs are reduced to 0.8% though.
Construction
Typically you start building Small Grids by dropping a small Landing Gear. Small grids only use small-grid type blocks, but note that some functional and decorative blocks are only available in small-grid size and some are not available as small-grid blocks. Assign blocks to the toolbar and press the number of the slot again to toggle between large and small size variant, if available. When attempting to add a new block to a small grid, the small-grid version is automatically selected. If a block does not have a small-grid version, you can’t add it to a small grid.
Is this block large grid or small grid?
Look at the icons in the top right of the block tooltip to distinguish large and small grid blocks.