near as i can tell (since the site posted for information was down (or peerguardian2 killed it and i didnt catch it) ), it's a game world. i'm guessing different shards would be like playing a game in a space setting, then joining another server and playing underwater. not the best analogy, but i'm guessing it's just another world to play on, so if you hate one world you can go join another one and see if the world is any better.
I have some other stuff downloading at the moment so i'll add this to my list of stuff to get while my pc runs overnight. with luck i wont have to erase files on my pc to make it fit (i'm running on a gig free)
EDIT 1: found a different site,
http://uo.stratics.com . on one of the pages for building houses, they mention shards, and viewing the same location on another shard. my new guess: shards = game servers
EDIT 2: peerguardian2 was killing uo.com, the site works just fine(noticed it was blocking stuff it shouldnta been when it didnt let uo patch). fyi to downloaders after me: unless my case is unique, it takes a long time to patch...
EDIT 3: thanks Corey! everything works great!
EDIT 4: final edit: just wanted to say thanks for saving me from getting a job - now i dont have to pay for ashen empires, because this is better and free
EDIT 5: ok so edit 4 wasnt the final one, but i figured out why you can't create elves. Hold your mouse over the "elves" selector. If you read the entire box, the last line states you need the mondains legacy expansion pack in order to create an elf. bummer, but since the servers free i dont see a reason to so much as think twice about it (if you want elves badly enough, go play ashen empires or pay for uo)