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The shell of an operating system is a program that presents an interface to various operating system functions and services. The shell is so called because it is an outer layer of interface between the user and the innards of the operating system.
Shells in many operating systems fall under two categories - command based and graphical based, providing a command line interface (CLI) to the operating system and a graphical user interface (GUI) respectively.
One of the most noted example of a powerful CLI shell is the family of Unix shells provided on Unix and Unix-like systems. An example of a GUI shell is Microsoft Windows' explorer.exe.
The relative merits of CLI and GUI based shells are often debated. CLI proponents claim that performing certain operations under CLI shells are much faster than that of GUI shells (such as moving files, for example), however GUI proponents claim the comparative ease-of-use and simplicity of GUI shells.