Ok this works (see ciode snippert for php):

and this html:

<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd">
<html xmlns="http://www.w3.org/1999/xhtml">
<head>
<meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1" />
<title>Untitled Document</title>
<link rel="stylesheet" type="text/css" media="screen" href="js/themes/basic/grid.css" />
<link rel="stylesheet" type="text/css" media="screen" href="js/themes/jqModal.css" />
<script src="http://ajax.googleapis.com/ajax/libs/jquery/1.3.1/jquery.min.js" type="text/javascript"></script>
<script src="js/jquery.jqGrid.min.js" type="text/javascript"></script>
<script src="src/jqModal.js" type="text/javascript"></script>
<script src="src/jqDnR.js" type="text/javascript"></script>
<script type="text/javascript">
jQuery(document).ready(function(){
jQuery("#list").jqGrid({
url:'example.php',
datatype: 'xml',
mtype: 'GET',
colNames:['Service','Activity', 'User','Item','File Box','Date'],
colModel :[
{name:'invid', index:'invid', width:55},
{name:'invdate', index:'invdate', width:90},
{name:'amount', index:'amount', width:80, align:'right'},
{name:'tax', index:'tax', width:80, align:'right'},
{name:'total', index:'total', width:80, align:'right'},
{name:'note', index:'note', width:150, sortable:false} ],
pager: jQuery('#pager'),
rowNum:10,
rowList:[10,20,30],
sortname: 'invid',
sortorder: "desc",
viewrecords: true,
imgpath: 'js/themes/basic/images',
caption: 'My first grid'
});
});
</script>

</head>

<body>
<table id="list" class="scroll"></table>
<div id="pager" class="scroll" style="text-align:center;"></div>
</body>
</html>

<?php require_once('includes/header.php'); ?>
<?php 
$page = $_GET['page'];
 
// get how many rows we want to have into the grid - rowNum parameter in the grid 
$limit = $_GET['rows']; 
 
// get index row - i.e. user click to sort. At first time sortname parameter -
// after that the index from colModel 
$sidx = $_GET['sidx']; 
 
// sorting order - at first time sortorder 
$sord = $_GET['sord']; 
 
if(!$sidx) $sidx =1; 
 
// select the database 
 
// calculate the number of rows for the query. We need this for paging the result 
$result = $db->query("SELECT COUNT(*) AS count FROM invheader"); 
     	while($result->fetchInto($row, DB_FETCHMODE_ASSOC)){
     		$rows[] = $row;
     	}
 
$count = $result->numRows(); 
 
// calculate the total pages for the query 
if( $count > 0 ) { 
              $total_pages = ceil($count/$limit); 
} else { 
              $total_pages = 0; 
} 
 
// if for some reasons the requested page is greater than the total 
// set the requested page to total page 
if ($page > $total_pages) $page=$total_pages;
 
// calculate the starting position of the rows 
$start = $limit*$page - $limit;
 
// if for some reasons start position is negative set it to 0 
// typical case is that the user type 0 for the requested page 
if($start <0) $start = 0; 
 
// the actual query for the grid data 
$SQL = "SELECT invid, invdate, amount, tax,total, note FROM invheader ORDER BY $sidx $sord LIMIT $start , $limit"; 
$result = $db->query($SQL);
 
// we should set the appropriate header information
if ( stristr($_SERVER["HTTP_ACCEPT"],"application/xhtml+xml") ) {
              header("Content-type: application/xhtml+xml;charset=utf-8"); 
} else {
          header("Content-type: text/xml;charset=utf-8");
}
echo "<?xml version='1.0' encoding='utf-8'?>";
echo "<rows>";
echo "<page>".$page."</page>";
echo "<total>".$total_pages."</total>";
echo "<records>".$count."</records>";
 
// be sure to put text data in CDATA
while($result->fetchInto($row, DB_FETCHMODE_ASSOC)){
echo "<row id='". $row[invid]."'>";            
            echo "<cell>". $row[invid]."</cell>";
            echo "<cell>". $row[invdate]."</cell>";
            echo "<cell>". $row[amount]."</cell>";
            echo "<cell>". $row[tax]."</cell>";
            echo "<cell>". $row[total]."</cell>";
            echo "<cell><![CDATA[". $row[note]."]]></cell>";
echo "</row>";
}
echo "</rows>"; 
?>

jqGrid not displaying data