Basically, you can only raise your shield if you're using a one-handed weapon, and certain stances can impede your ability to deflect attacks after your character has already acted.
There are also two types of shields, which I'll call mitigators and deflectors. Mitigators have both a defensive value and a percent value. The percent value represents how often the holder will raise his or her shield while the defensive value represents how much defense will be added upon raising it. This defensive bonus is not always active despite what the equip screen may show. It only takes effect when the shield is raised.
Deflectors, on the other hand, only have a percent value associated with them and therefore parry damage completely when raised, though with the caveat that multi-stage attacks still partially pierce through as only the damage of the first hit is negated. Deflectors tend to weigh less than mitigators but generally have lower activation percents.
It should also be noted that the types of attacks both types of shields can block are governed by hidden flags. Most mitigators, for instance, only defend against slash, strike, pierce, and missile damage, but the Dragon Shield also defends against heat, cold, and electricity. Similarly, most deflectors deal with slash, strike, and pierce attacks, but the Willguard works against all damage types.