Okay, I am completely new to Pathfinder, and still trying to get to grips with the rules, so please be patient if I'm saying something stupid.
So here goes nothing; why do Small creatures get a bonus to attack rolls and larger ones take a penalty? How does being smaller than your opponent help you hit him harder? And what about the CMD penalty? Surely being small should make it easier for you to weave through a grab?
I appreciate any answers, thanks.
Smaller creatures don't hit harder, it's just easier to hit targets if you are smaller than them.
And the CMD penalty, I expect is due to the fact that the smaller you are, the easier you are to hold onto.
Bigger creatures are a bigger target to hit for a smaller creature, thus the size bonus to attack for small creatures (since medium is the norm). Note that big foes don't hit softer, they hit harder (larger damage die as you go up in sizes and smaller damage die as you go down in sizes).
Smaller creatures are easier for a larger creature to grab, while in a similar vein larger creatures are harder to grapple and control if you're smaller than them. Of course, a small creature could be built to be extra elusive and harder to grab, but as a general rule larger creatures have an easier time grappling with a smaller creature than they do with something their own size.
As above, recapitulated:
Attack rolls don't affect damage (except critical hits somewhat), only accuracy.
Strength affects damage, and there is a correlation between size and strength for most monsters.
Strength also helps melee accuracy, though not ranged accuracy.
Combat Maneuvers are attacks where size is a benefit rather than a hindrance — trying to more the opponent or knock them over rather than just trying to hit them. In 3.5, there was an initial touch attack roll to reflect what you mention as "weaving through the grab". In the end, the math works out pretty similarly by just including dex in the defense, so that went away in the name of simplicity.
It's kind of a weird system, but it accounts for hitting huge targets being easier for human-like combatants, even though hurting them is hard. But two huge targets fighting eachother are pretty much evenly matched.
Thanks guys, I was thinking about it completely the wrong way. When it's actually laid out in front of me, it does make a lot more sense.