A feeling of nervousness in social situations.

The defining feature of social anxiety disorder, also called social phobia, is intense anxiety or fear of being judged, negatively evaluated, or rejected in a social or performance situation.

People with social anxiety disorder may worry about acting or appearing visibly anxious (e.g., blushing, stumbling over words), or being viewed as stupid, awkward, or boring. As a result, they often avoid social or performance situations, and when a situation cannot be avoided, they experience significant anxiety and distress. 

Symptoms

Social anxiety can range from mild discomfort, to much more severe forms of Social Anxiety Disorder (SAD). Individuals higher in social anxiety avert their gazes, show fewer facial expressions, and show difficulty with initiating and maintaining conversation.

People with social anxiety disorder usually experience significant emotional distress in the following situations:

• Being introduced to other people
• Being teased or criticized
• Being the center of attention
• Being watched while doing something
• Meeting people in authority ("important people")
• Most social encounters, especially with strangers
• Going around the room (or table) in a circle and having to say something
• Interpersonal relationships, whether friendships or romantic

Many people with social anxiety disorder also experience strong physical symptoms, such as a rapid heart rate, nausea, and sweating, and may experience full-blown attacks when confronting a feared situation. 

Although they recognize that their fear is excessive and unreasonable, people with social anxiety disorder often feel powerless against their anxiety.

Frequency

Nearly 90% of individuals report feeling symptoms of social anxiety (e.g. shyness) at some point in their lives.

In the United States, epidemiological studies have recently pegged social anxiety disorder as the third largest psychological disorder in the country, after depression and alcoholism.  It is estimated that about 7% of the population suffers from some form of social anxiety at the present time.  The lifetime prevalence rate for developing social anxiety disorder is 13-14%.

Why do we feel anxious?

Though unpleasant, social anxiety has an important role in encouraging social bonds. The function of social anxiety is to increase arousal and attention to social interactions, inhibit unwanted social behavior, and motivate preparation for future social situations.

Further Reading

More on Wikipedia.

Social Anxiety ( Anxiety & Depression Inst. of America )

Social Anxiety ( WebMD )

Social Anxiety Institute