From Linux Shell Scripting Tutorial - A Beginner's handbook
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Shell (command interpreter) is commonly used term in Linux and UNIX operating systems. It is nothing but the interactive user interface between you and an operating system. In other words, the shell provides access to the services of a kernel. A shell is simply interactive user interface that executes commands. A shell can be used as a:

In interactive mode, shell accepts input typed from the keyboard. When executing non-interactively, shells execute commands read from a file. For example, when system boots shell works in non-interactively mode and runs various scripts for /etc/rc.d/ or /etc/init.d/ directory.

Shells also provide a small set of built-in commands such as cd, break, continue, and others.

Common Shell Features