I was confused from the beginning of the story. What is this shack and why are these people there?
The shack is an old plantation house that serves in some ways to highlight one of the themes of the story and one of the themes that runs through much of Faulkner's work. The plantation itself is ruined and the house is just barely standing up and the people that live there are also ruined, almost empty shells of human beings. The professor has been brought there by Popeye as it serves in some ways as a kind of road house or a place where people travelling can stay but mainly it serves as a physical symbol of this place where these broken people have ended up.
The people in the house are bootleggers, a loosely connected group that makes moonshine but in the end have to find someplace to go when they are discovered.