L. I am so sorry to hear this about your mother. My deepest prayers that God will draw you closer to Him during this time. I think you have received some great advice so far. You can explain things to your child, just like you would explain anything else to a 3 year old. You don't have to go into deep details with him, but I think it may be better to warn him a little bit. Not overly talk about it, but rather explain to him when you feel appropriate, that grandma is sick and one day she Jesus will come get her and take her to heaven. This is a great opportunity to teach him about Heaven. He may not fully understand, but it's still okay to talk about it. My daughter is three also and she talks about things dying like her grandparent's dogs died...she doesn't know exactly what that means but one day it will all come together. We talk about how the dogs are running around with Jesus. There's always children's books that help explain things... seems there's a book for everything. A few good ones:
Sad Isn't Bad by Michaelene Mundy
What's Heaven? by Maria Shriver
I miss you, by Pat Thomas
The What's Heaven one is VERY good, you should really look for this one.
Another idea... while your mother is still here. Start a memory book for your son. Special photos, things done together... you can make one for yourself also.
There's another book that you may find helpful for yourself, called Cradled all the while by Sarah J. Corse. This book has been featured on CBS.
Again, I am so sorry, and I pray for God's unwavering strength and love to you and your family.