There are three reasons that I know of why rabbits grind their teeth. 1) being content, happy, etc., 2) pain, physical pain, 3) emotional pain
When Sweetie lost Prince, her bondmate, back in August 2011, she grinded her teeth and I didn't know why. She wasn't in any physical pain. I found out that she was in emotional pain over losing Prince. Rabbits do experience emotional pain, physical pain, pleasure, all different emotions. The emotional pain grind is softer than a physical pain grind, but louder than a content, happy, purring grind.
I have heard Sweetie do physical pain grind, emotional pain grind, she has only purred a couple times I think.