Shells is the name given to those Lunars born with a genetic mutation. The name is intended to be derogatory in that shells are empty of the gift shared by other Lunars. Due to the process of hormesis which led to the development of their abnormality, shells are unable to receive electromagnetic stimulation.
This makes them the object of suspicion and even hatred, as their inability to receive electromagnetic stimulation means that they cannot be brainwashed or controlled by Queen Levana. Levana carries on the policy of official persecution instituted by her late sister, Channary, who decreed that any Lunars born as shells were to be disposed of immediately.
For much of the story, Cinder believes herself to be a shell, which puts her in a very dangerous position. It's only later on that Cinder realizes that she isn't really a shell after all; it's simply the case that her father had always suppressed her Lunar gift using a bioelectric security system.