Shaders are programs(algorythms) that run on vertex and pixel buffers dirrectly in the GPU memory. They are capable of running extremely fast because they are both directly on the vid card(which means there's no need to resend data over the AGP), and the GPU can access everything very quickly off that memory.
[edit]What you're talking about is the old style "shader". The kind where it's simply opperations running on a texture.
[edit]What you're talking about is the old style "shader". The kind where it's simply opperations running on a texture.