I'm confused.
The wiki only says "Grass will grow on dirt if it is exposed to sunlight or bright light after some time." http://wiki.minetest.net/Dirt_with_Grass And, after hours of trying to get some grass blocks to spread from one island in an ocean to another and seeing absolutely no progress, I believed it didn't spread. Then again, I never saw any grass blocks appear spontaneously either.
I cheated in several stacks of grass blocks, placed them in the world and then later hoed some for a farm. I didn't know the hydration radius and some turned to dirt and then, quickly, to grass blocks.
There is a recipe for grass blocks and I would have made some if I had known they would spread, but the wiki doesn't say that and for some reason I didn't see that in my world until after I cheated in a bunch of them.
Maybe someone who knows how grass blocks work can change the wiki?