A Shapefile is a Group of several files all with the same name but different extensions that comprise an Attribute table, a spatial location table, Projection file (sometimes) and some other files that allow the representaion of Points, lines, and polygons, as well as "multipatch items (blobs) in ESRI software and other Geospatial Vector software.
These are "loose' files in that they are stored where your data storage is located for your GIS features. ESRI's new File Geodatabase featureclass is similar to this structure as they are also individual files that are stored in a specific Folder (named for the File Geodatabase) -you can see the individual files.
File Geodatabases and shapefiles seem to have some better performance issues than a featureclass that is stored in a personal Geodatabase (MS ACESS OEM Engine), although the encryption on the file geodatabase sometimes slows certain editing tasks.
Whereas I can add one shapefile to a Map document and only open one file, with a ACCESS personal geodatabase when I access one featureclass from an MDB geodatabase I am opening the entire MDB file. The limit on an entire MDB Geodatabase is 2GB whereas a single file geodatabase dataset (group of featureclasses) can be as large as 1 TB
See ESRI's website for more info: http://webhelp.esri.com/arcgisdesktop/9.2/index.cfm?TopicName=Types_of_geodatabases