Why do we need anhydrous ether to form a grignard reagent?
Because water is the natural enemy of the Grignard reagent.
When you do Grignard and organolithium chemistry, you take great care to ensure that your glassware and solvents are dry. Ether solvents are carefully dried over and distilled from alkali metals; glassware is dried under vacuum over a soft bunsen flame (a heady mix with ethereal solvents!). Often the reaction is conducted under an atmosphere of dry dinitrogen or argon.
Why take these precautions? Because water is the natural enemy of the Grignard reagent:
This reaction is rapid and irreversible, and water is of such low molecular weight that a little goes a long way to reduce yield. Sometimes we can exploit this reactivity. Suppose we wanted to add a deuterium label to an alkyl chain for some other experiment; i.e. you need