I wouldn't describe your manager's manager as your direct supervisor . . . in my experience, your direct supervisor is most typically the person who manages your day-to-day work, completes your annual performance review, helps guide your professional development, etc. I'd imagine that your manager would actually be your direct supervisor. Is it accurate to call your manager's manager a unit/departmental/team head/director/manager or something like that? If you settle on one of these descriptors, it'd be advisable to verify the term with your manager's manager so that you're sure you're on the same page.
Regardless, in many ways what is going to be more important that the title is how your recommender sets the scene when explaining his or her relation to the you and commenting on the duration of the relationship - this is usually asked with a question like "How long have you known the applicant, and in what context?" In introducing the your role in the organization, as well as his or her own, your recommender has an opportunity to explain not just what you do and to whom you report, but why your work matters and how you fit into the big picture. These details will help the reader understand your value to the organization and will also provide a bit more context for your other application materials.
I hope that helps and good luck on your applications!
Regards,
Jon