In what sense are you refering? Do you just want to know what it is or are you trying to understand how to better use it? I mean, in the purest sense, .shtml is just a simply an extention. You could easily use (assuming your server is properly set up) .jhtml, .bhtml, or even .zhtml.
For the most part, and for all web pages I have developed, .shtml files are usually parsed as SSI (server side includes) files. This basically means that the web server takes in other HTML files, and combines them to another HTML file for final out put. SSI can be used in other things as well, such as finding the size of your page, the page name, and when the page was last modified. But like DigitalBoy said, the server, Apache or IIS (or something similar), can parse .shtml files as anything you set it to parse.
I am sure that you can find information on SSI at just about any site that has information about CGI.
Hope this helps.
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