If I'm not mistaken, Flash started out as a plug-in called FutureSplash. Shockwave/Director were different applications. Macromedia purchased FutureSplash, and Flash was born out of that.
Both Flash & Shockwave are vector-based animation packages, however Flash is designed primarily for use on the web. Therefore, Shockwave is far more powerful, and includes far more features than Flash.
Flash is vector based but Shockwave is primarily bitmap based - it has vector support but it's not as slick as Flash's however a Shockwave application can directly host Flash movies so you have a 'best of both worlds' situation. Shockwave isn't actually a self contained authoring package like Flash - it's the web player for Macromedia Director movies.
Shockwave is more powerful than Flash in handling heavily detailed bitmap graphics, 3D, video and sound but the plug-in that allows it to run in a browser is many times the size of the Flash Player so it requires much more download time, hence most people don't bother to download it (it's about 10 minutes on a normal modem). So, more power but smaller audience.
The scripting languages are different too, Director uses a more Visual Basic style language called Lingo whereas Flash Actionscript is closer to the modern Javascript-type ECMA syntax.
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