Red and I tested this last night. Here are our observations:
Very interesting - what it boils down to is that if on your screen you are hiding in grass - then someone looking at you from very far away (and thus the grass is invisible to them) then you (the person hiding) will sort of sink into the ground - from the perspective of the observer.
The taller the grass the more you sink in. Mind you this is just about grass, not bushes/etc.
If you are wearing an alice backpack - you're stuffed cause it will never sink in - no matter how good the grass is - your whole body might sink in but the alice pack will always stick out.
Exception to the above is the ghillie suit of course which shows no backpack.
Next: if you are moving, even if through tall grass, you sink in a lot less.Super tall/thick grass will cause you to sink in of course but never as much as being still.
Elevation of the observer appears to have little to no effect: I was on very high ground compared to Red when he sank in. If I was closer and the grass was in effect and this concealment mechanic was not in effect then he would be plainly visible to me - since my angle of observation was large enough to bypass the grass - ie I'd be looking at him from above almost.
Lastly, do not ever look up.
You look like a seal doing salute to the sun yogga. Your upper body lifts up, your head going about half a meter into the air, with the business end of your gun about 1meter from the ground. When using grass for concealment, always look as low as possible and use alt-freelook for looking.