The Hobbit

In "The Ugly Truth" Grandpa is seen reading "The Hobbit" to as a bed-time story to Greg when his grandson was a small child.

Later, in "Old School", when Greg is discussing the problems of sleeping in Manny's room, he says that Manny is probably picking out the longest bed-time stories there are just to annoy him. We then see Susan Heffley reading a book aloud, and starting with "In a hole in the ground there lived a Hobbit".

In real life, the Hobbit was written by J.R.R. Tolkien, and was published in 1937.