Shields are among the 3 defensive gear types, along with helmets and armor. Shields can be used to block attacks by doing the "Defend" action (Press and hold "X" in mouse and gamepad movement or "Right Click" in keyboard movement) while in the field of combat. Shields form a blue bubble that blocks attacks from all directions when defending. This bubble, when attacked, eventually turns red and breaks, and when that happens it is unusable until the shield recharges again.
Defense is the ability to withstand amounts of damage, it is unknown if the defense rating of a shield affects how many attacks it can block. There are 4 types of attack: Standard, Piercing, Elemental, and Shadow. The more defense the shield has of that type (stats are viewable by hovering over the shield in the arsenal), the more damage you will avoid from that type of damage.