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Yes, they do look at your grades. Who sees them is going to vary depending on how the chapters do membership selection. It could be that just the recruitment team sees your GPA, or it could be that every woman in the chapter considers your GPA.
How big of an impact it makes is going to depend largely on the school. At some schools, all of the chapters may auto-cut anyone below a 3.0. At other schools, recruitment isn't as competitive, and they have some wiggle room with grades if they really like you.
If registration takes place during the summer and recruitment is at the beginning of the school year, your summer grades may not be taken into consideration. If it's later in the fall, they almost definitely will be considered. Unless you have alumnae submitting letters of recommendation for you, they will not see/know your quarterly GPA (as far as I know).
The only guaranteed way not to get a bid is not to go through recruitment. You shouldn't be embarrassed if you go into it hoping to make friends and meet people, because you certainly will! (Although if it doesn't work out, it's of course natural to feel disappointed.) Best of luck to you.
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