Changes in physical properties in homologous series : Solubility
My question is regarding the last line, what kind of gradation in solubiltiy is observed? Increase or decrease?


Both

Solubility is not one single property, but a collection of related properties. Solubility in water is different from solubility in ethanol, which is different from solubility in benzene. 

The cause of the gradation of (all of these) properties is a systematic change in intermolecular forces. The number and strength of these forces increase as molecular mass increases, which increases the boiling points and melting points. For solubility, we care about the interplay between the solute and the solvent, so we also need to know the type of intermolecular force (polar vs. nonpolar) in addition to the total strength.

For the homologous series of alcohols below, I have listed their water solubilities (mined from UC Davis's ChemWiki and from Wikipedia articles). Notice that as the number of $\ce{CH2}$ units increases, the water solubility decreases. This decrease occurs because, while the strength of nonpolar intermolecular forces (London-Dispersion) increases with each added $\ce{CH2}$ until the nonpolar interactions overpower the polar interactions (dipole-dipole and hydrogen-bonding) of the alcohol functional group. Water is a polar solvent, and with each added $\ce{CH2}$, the alcohol molecules begin to have stronger attraction to themselves than to water, and the solubility decreases.

Solubility of the homologous series of linear n-alkanols in water


Methanol $\ce{CH3OH}$ - miscible (infinite)
Ethanol $\ce{CH3CH2OH}$ - miscible (infinite)
n-propanol $\ce{CH3CH2CH2OH}$ - miscible (infinite)
n-butanol $\ce{CH3CH2CH2CH2OH}$ - 80 g / L
n-pentanol $\ce{CH3CH2CH2CH2CH2OH}$ - 22 g / L
n-hexanol$\ce{CH3CH2CH2CH2CH2CH2OH}$ - 5.9 g / L


At the same time, the solubility of this homologous series of alcohols increases in nonpolar solvents like hexane and benzene. Those data are not readily available, but a quick experiment will verify it. The increased amount of nonpolar interactions in the alcohols increases their affinity with nonpolar solvents.