Shareware is a type of software that is available to computer users for trial purposes without requiring any upfront payment. This software has some of the functions limited or is set up where the user can only use it for a certain amount of time before it loses functionality. In some cases, certain features will not be available until after the license is purchased, which will theoretically encourage the user to pay for and register the program. And hopefully, these new users will tell their friends.
Then there is also what is known as open source. Take for example the video codec Xvid. It is free to download, use and even allows users to develop and add features to the software. A company may not want to allow for open viewing of their code so they choose to offer their product as shareware to give potential customers a chance to try the product without having to purchase it fully. This is a good strategy for many companies because they can show customers the quality of their product and hopefully attract new users.
Shareware has become very common among game publishers who often offer the game for a short duration trial (such as one hour of game play.) This lets potential customers get a taste of the product and they will likely want to purchase the game and continue playing when their trial runs out. But then many people would rather just get the full version of a product so they would rather have the open source version. Why get only part of video editing software when you can get the whole thing free with a program like Virtual Dub?
Some companies may not wish to offer shareware versions of their products if they are selling a well-known product, because they are not often going to attract new users. Other firms may choose not to offer shareware versions of their products because of security concerns; however, with technology at the level it is now, this is less of an issue. Then others like Handbrake would rather just open the code and let users develop it for them.
Shareware is one of several forms of software that is available. Retail software is commercial software that is only available by purchasing the license. Public domain software is not copyright protected at all and is free for any use. Freeware is software that is copyright protected, but the author requires no payment for it to be used.