Size Modifier or SM. A positive number makes you easier to hit. A negative modifier makes you easier to grapple.
B19 discusses bonuses and penalties to hit those of higher or lower SM.
B402 "Size Modifier and Reach" discusses a bonus to grapple those of lower SM. Unclear if this stacks with B19.
Limitations: Size (allows ST and HT to be bought cheaper)
Also see Large-Area Injury and Trampling
FAQ
http://www.sjgames.com/gurps/faq/FAQ4-3.html#SS3.4.2.23
3.4.2.23 How do I apply Size Modifiers in melee combat? Is a large SM anything other but trouble? Normally, the size modifier of your opponent is applied to your attack roll, whatever yours is. The problem is in some cases, it causes a big problem; for example, two ants (SM -10) have practically no chance of hitting each other unless they have Brawling-20+. To correct this, a new optional rule has been introduced:
When two opponents face each other in melee combat, apply the difference in size modifiers as a bonus to the smallest attacker and as a penalty to the biggest. However, the bonus to a small opponent is limited to +4; attacking a wall ten times as big as you is no easier than hitting a wall four times as big – your reach limits where you can hit.
Note: This is an addendum to the rule in the Basic Set, not an erratum.
Very optional rule: even though being closer than 2 yards normally gives no bonus to ranged attacks, a GM may declare that being closer than 2yds gives bonuses only to offset the size penalty. That way two characters will have the same chance to hit if their proportions (size/distance between) are the same. Warning: I couldn't find a Krommquote for this one, but it solves some problems.
And before you think that big SM is always bad in combat, consider:
You can buy high ST (including Arm ST, Lifting ST and Striking ST) and HP at -10% discount per +1 SM, up to -80% (pp.B15-16). When you try Intimidation skill against a smaller-sized victim, you get +1 per the difference in SM (p.B202). Any weapon you're holding has longer Reach than usual (p.B402). When you try to grapple a smaller opponent, you always get +1 per the difference in SM (p.B402). When you try to pin a smaller opponent, you always get +3 per the difference in SM (p.B370). If you are larger than your foe by 2+ SM (or you are larger than your foe by 1+ SM and he is lying prone), you can attempt trampling, which can be avoided only by Dodging (p.B404). If your SM is 1 or more, Regular (friendly or hostile) spells cost (1+SM) times FP than usual to affect you (p.B239). If your SM is 1 or more, poisons take (2 to the SM-th power) times longer to affect you (p.B438). While larger size requires larger cover, you also gain the ability to shoot over larger obstacles. Also notice that crossing an SM-3 (relative to your SM) obstacle is easy. You get to use larger weapons (this is most relevant in DF, but bigger guns could be an advantage too).
Features
You can buy high ST (including Arm ST, Lifting ST and Striking ST) and HP at -10% discount per +1 SM, up to -80% (pp.B15-16).
When you try Intimidation skill against a smaller-sized victim, you get +1 per the difference in SM (p.B202).
Any weapon you're holding has longer Reach than usual (p.B402). When you try to grapple a smaller opponent, you always get +1 per the difference in SM (p.B402).
When you try to pin a smaller opponent, you always get +3 per the difference in SM (p.B370).
If you are larger than your foe by 2+ SM (or you are larger than your foe by 1+ SM and he is lying prone), you can attempt trampling, which can be avoided only by Dodging (p.B404).
If your SM is 1 or more, Regular (friendly or hostile) spells cost (1+SM) times FP than usual to affect you (p.B239).
If your SM is 1 or more, poisons take (2 to the SM-th power) times longer to affect you (p.B438).
While larger size requires larger cover, you also gain the ability to shoot over larger obstacles. Also notice that crossing an SM-3 (relative to your SM) obstacle is easy.
You get to use larger weapons (this is most relevant in DF, but bigger guns could be an advantage too).
Technical Grappling
page 27 mentions:
- Treat the victim’s limbs or neck as two SM smaller
Quotes
Kromm
http://forums.sjgames.com/showpost.php?p=67763&postcount=10
The reason why small animals seem to evade well is because, usually, we're trying to grab them. SM applies as usual when grappling; if you try to grapple a mouse, you suffer its SM on your attack roll just as you would on any attack roll, and you grapple at -9 or so. Even if you succeed, the mouse may dodge. In plain English, the mouse has "evaded" you if you fail. However, it hasn't evaded you in GURPS terms -- you just missed, or it dodged. The mouse would only have evaded you in game terms if it had tried to run over your body or between your legs and you had failed to swat it back.
Other
Bruno did an interesting breakdown where it seems like a disadvantage: http://forums.sjgames.com/showpost.php?p=1289787&postcount=128
Threads
Ups and Downs: http://forums.sjgames.com/showthread.php?t=80891
Grappling http://forums.sjgames.com/showthread.php?t=83008