There are two ways to do grouping with paging. One is to group before paging and other is to page before grouping. The first one is the default behaviour.
The idea behind the second approach is to do the paging before the grouping so that RadGridView will never know that someone is paging its data. It will simply think that its ItemsSource is a collection with several items (i.e. PageSize) and will group these items.
If you would like to implement the second approach, then I would suggest you to check the Paging before Grouping Demo