We all have our own ideas of who we are and we are constantly seeking for confirmation of this image from everyone around. We tend to view ourselves as always doing our best and having good intentions. Contact with reality often verifies this belief i.e. when we mess things up because of our negligence, lack of competence or when we are just not in the mood to do something. According to Jung the personal Shadow grows in parallel to the Persona as its negative and is completely independent of the Ego.
It is a creation, living in our unconsciousness: a container for all the aspects of our Self that didn't fit in the frames of our own image of ourselves or were not socially appropriate.
"Unfortunately there can be no doubt that man is, on the whole, less good than he imagines himself or wants to be. Everyone carries a shadow, and the less it is embodied in the individual’s conscious life, the blacker and denser it is. If an inferiority is conscious, one always has a chance to correct it. Furthermore, it is constantly in contact with other interests, so that it is continually subjected to modifications. But if it is repressed and isolated from consciousness, it never gets corrected" - Carl Gustav Jung
We usually negate the Shadow or project it onto others which leads to interpersonal conflicts. We tend to believe that everyone else operates the same way as us and is led by the same reasons. Unconsciously we expect other people to experience the world in the same way as we do. However, such an expectation is irrational and not logical.
For example, you surely came across somebody in your life (your boss, co-worker, in-law) who you believed “disliked” you for no reason. When this happens you are likely to be convinced that their words, tone of voice or the way they look at you reflects their hidden hatred towards you. You fail to notice that the belief you hold towards them is often nothing more than a product of your own projection. When you dislike someone in the first place, you “protect” yourself from this feeling (you reject that you could possibly dislike someone because of our own jealousy, prejudices or even for no reason, hence you fail to admit it) by projecting it on someone else.
When you become irritated and short tempered with that person, you can either project it onto them with your anger or, as we often do (to maintain the “good” image of yourself) suppress these emotions, and pull the (unwanted) energy back into what we call the Shadow.