“Grail” is an Anglicization of the medieval French word “graal” which meant “dish” or “platter”, not “cup”. See the definition by the medieval author Helinandus: http://www.maryjones.us/ctexts/helindanus.html .
See http://www.maryjones.us/ctexts/lys01.html and search on “grail” for one medieval text which uses the word in a secular context and where it obviously means “dish'' or “platter”, not “cup” or “chalice”. In the Welsh Arthurian romance “Peredur” it is translated as “discyl” which means “dish”, “platter”, or “salver”. Search on “salver” at http://www.donaldcorrell.com/mabinogn/peredur.html .
Or read Sir Thomas Malory’s “Le Morte d’Arthur” which makes the same identification ( http://www.sacred-texts.com/neu/mart/mart426.htm ):
“Then took he himself the Holy Vessel and came to Galahad; and he kneeled down, and there he received his Saviour, and after him so received all his fellows; and they thought it so sweet that it was marvellous to tell. Then said he to Galahad: Son, wottest thou what I hold betwixt my hands? Nay, said he, but if ye will tell me. This is, said he, the holy dish wherein I ate the lamb on Sheer-Thursday.”
In a very few medieval romances, the grail is called a chalice, probably because “graal” as a technical word for an item of kitchenware was sufficiently obscure that some authors did not know what it meant. According to Wolfram von Eschenbach in his “Parzival”, the grail was a precious green stone called lapis exilis which had been brought down from heaven by angels in pagan times, although only later Christians were able to understand it fully.
The Victorian poet Alfred Lord Tennyson selected the minority chalice interpretation in his “Idylls of the King” and his work greatly influenced following modern authors who mostly follow this minority interpretation.
The grail first appears in the incomplete Arthurian romance of “Perceval” by Chrétien de Troyes as a gold and gem-studded dish seen by Perceval when he visits the castle of a crippled king. It is accompanied by a spear that miraculously bleeds from its point. Grail and spear are carried into another chamber at each course of the meal.
Later, Perceval learns that if he had asked about these strange events, then the king would have been healed.
Still later, Perceval is told by his uncle who is also uncle to the crippled king, that the grail is a very holy thing and that it contains within it a mass wafer which has been the sole food of another king within the chamber for many years.
Since Chrétien died before finishing this tale, no-one knows how he would have ended it. There are a number of continuations and other versions based on Chrétien’s work which other writers wrote according to their own contradictory ideas. None of these variant versions entirely agrees with Chrétien’s account and many are very different indeed.
The Burgundian writer Robert de Boron wrote a poem called “Joseph of Arimathea” which first (among surviving works) connects the grail to the last supper and to Joseph. For most of this work, see http://books.google.com/books?id=-Mz3sEURhiQC&printsec=frontcover&dq=intitle:merlin+inauthor:nigel+inauthor:bryant&hl=en&ei=3EXjTJHRNMnFnAeHrpyHDw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCkQ6AEwAA#v=onepage&q&f=false .
See http://en.wikipedia.org/wiki/Perceval,_the_Story_of_the_Grail and http://www.mcgoodwin.net/pages/otherbooks/ct_perceval.html for an idea of Chrétien's story.
See http://www.maryjones.us/ctexts/pdpreface.html , http://omacl.org/Graal/ , and http://www.yorku.ca/inpar/quest_comfort.pdf for later stories.
There were numerous Welsh and Irish tales of miraculous cauldrons, platters, hampers, and drinking horns and it is likely enough that some such story lies behind Chrétien’s romance and probable that the other medieval romances that mention the grail mostly “stem from” Chrétien’s work (and the imaginations of later authors).
See http://www.timelessmyths.com/arthurian/grail.html for a good discussion of the medieval tales.