Shell Sort is a generalization of insertion sort that works by sorting elements with large gaps first then decreasing the gaps until a gap of 1, which is regular insertion sort. It has a worst case time complexity of O(n^2) but average complexity near O(n). Merge Sort divides the array into halves recursively, merges the sorted halves back together to fully sort the array. It has a best, average, and worst case time complexity of O(nlogn) and requires O(n) auxiliary space but is not an in-place sorting algorithm.