About.com offers this description of how graupel forms:
Graupel forms when snow in the atmosphere encounters supercooled water. In a process known as accretion, ice crystals form instantly on the outside of the snow and accumulate until the original snowflake is no longer visible or distinguishable.
The coating of these ice crystals on the outside of the snow is called a rime coating. The size of graupel is typically under 5 millimeters, but some graupel can be the size of a quarter (coin).
To tell the difference between graupel and hail, you simply have to touch a graupel ball. Graupel pellets typically fall apart when touched or when they hit the ground. Hail is formed when layers of ice accumulate and are very hard as a result.
The cold air aloft helping to form the precipitation comes courtesy of a dip in the jet stream, set up by an upper level low pressure system off the coast of New England.
The counterclockwise flow around the low is forcing winds at high altitudes into the region from the northwest. A disturbance (see the blue and green shades over D.C. in the image to the right) riding along this flow is providing lift and energy for the mix of precipitation.
Once the sun goes down, these showers should dissipate, as the heat from the sun mixing with the incoming stream of cold air is driving the precipitation process.