Shields
Shields can block a large number of melee attacks, Shields must be equiped on the left arm. Shields damage quite fast when in use, so repair them often. The subskills for each shield type only help when using that type of shield and is the only skill that matters. Overall shields does next to nothing. Shields can be used to Shieldbash an opponent, lowering their defense for a short time and sometimes causing a small amount of damage to them.
Shields are also extremely effective at blocking arrows. They are only effective if you are looking at your target and do not block arrows and attacks from behind you.
Types
There are 6 types of Shield, each has its own subskill.
Theory
NOTE: This is not confirmed
The larger shields seem to block more often, but it also seems that while using a Large iron shield, I attack less then if I was just using a single one-handed weapon. So it may be that the larger the shield the more it blocks, but it also inhibits your attacks more.