The contraction What's in your example expands to What is.
CGEL (pages 505-6:) tells us in Section 19 under Interrogatives:
In general, the interrogative pronouns who and what take the default value of singular.
Later in the same section, it also tells us:
The default singular values for who and what can, however, be overridden when there is a presupposition that the answer is plural: (examples follow)
If there is an expectation or prior knowledge that the pronoun refers to a plural subject, the default singular value may not be expected. In your question (as edited) there are multiple items in the bags. It may therefore be proper to use the plural form of the verb in:
What are in the bags?
However, there is an important distinction between proper or grammatically justifiable and idiomatic. In common speech and usage, the question would very seldom be posed in that way by a native English speaker. In particular, the contraction What's is used in numerous contexts in which a plural verb might be "correct," but in which the construction What are would elicit puzzlement from the listener. For example:
What are going on?
What are new with you?
What are on television tonight?
When what is used as an interrogative pronoun and subject, it usually takes the singular form of a verb. To take the plural form, your example question could be reformulated so that what functions instead as an interrogative adjective:
What items are in the bags?
(A detailed answer to this and related questions can be found under the question Which is the correct question (“Who has” vs “Who have”)?)
Addendum: A harmless drudge asserts that what in the present construction may represent what he calls a "special singular sense" of the pronoun. It obtains only when the preposition following what's is in, and when the object of in is a noun or NP that describes a container. He reasons: There is an elision in the construction "What's in the sth" when sth is a container; the elided words are each thing. The OP's sentence, in his reasoning, therefore parses correctly as What is (each thing) in the bag?