The ESRI Shapefile (SHP) format is a common format to store geospatial vector data. A 'shapefile' actually consists of at least three files with different extensions but the same filename. I.e. Roads.shp containing the geometry, Roads.dbf containing the attributes for each geometry and Roads.shx containing index information. All three of these files must be present with the same name.
There are other optional files associated with a shapefile ( I.e. *.sbn, *.sbx, *.prj and *.shp.xml which contains metadata information). With the *.shp.xml files especially, it is important to not confuse these with the .xml files needed for the Shp2Vec program to work.
A shapefile can store simple point OR line OR polygon features. It is the format used by the Shp2Vec tool of the FSX SDK to generate vector based terrain scenery.