Photoshop Shapes are vector images that you can size up or down without degrading the image quality. The best thing about using Shapes is that it saves you time. For example, few people can draw a perfect circle (especially with a mouse). If you click, drag, and draw a vector image, as opposed to drawing them by hand with one of the pen tools, you can draw a Custom Shape in mere seconds.
You start by selecting the Shapes tool. The default is the rectangle shape, so look for a square on the toolbar, (currently seventh icon from the bottom between the Path Selection and the Hand tool). You can choose from the Rectangle, Rounded Rectangle, Ellipse, Polygon, Line, or Custom Shape tools.