Analyzing sniffed data from pins of LCD 2*16 using Atmega32
These kinds of alphanumerical LCD displays have been using the same protocol for decades, so all the controller IC manufacturers make it basically the same way. I'm not sure if you're trying to figure out the protocol to be able to use the LCD or if your question actually is something like how to make a logic analyzer, but in any case it might be easier for you to first understand the data traffic between the microcontroller and the display. After that it's easier to either communicate with the LCD or make the logic analyzer. 


Pins 1, 2 and 3 are Ground, Logic VCC and Panel Bias Voltage. The Panel Bias voltage depends on the display type and the requirement for proper contrast can be anything from -10 volts to +2 volts. It's actually a negative voltage referenced to VCC.
Pin 4 is register select; low to access the control registers, high to read/write data.
Pin 5 is Read/xWrite; it's permanently low because the microcontroller only writes to the module, doesn't read.
Pin 6 is Enable, an active high clock pulse; typically data is latched on the falling edge.
Pins 7 to 14 are a 8-bit data bus. Bit 7 is the most significant bit and the protocol is constructed so that you can select 8 or 4-bit communication with only the bits 7..4 connected. In 4-it mode, all bus transfers are done with two Enable pulses, first for the High nibble (bits 7..4) and the second for the Low nibble (bits 3..0).
Pins 15 and 16, if present, are connected to the LCD backlight. 


Here's one datasheet for one of the controller ICs you can refer to about the protocol:

https://www.sparkfun.com/datasheets/LCD/st7066.pdf