The sheepshank is a knot that serves three purposes. Please see the ASCII representation below for the label references.
This shank is most commonly used for shortening ropes without cutting them. Unlike most knots, the sheepshank is not pulled tight into a single area of intertwining rope. Instead, then knot can extend for long distances. By allowing any excess rope to be "used up" in the pieces labeled A, B, and C, the rope can easily be shortened to one-third of its original length. The person tying the rope can also choose to add multiple half hitches (labeled HH1 and HH2) to make the knot more secure.
Though I would never do this myself, and could never suggest actually doing this, a less common use of the sheepshank is for rappelling or rock climbing. When a serious backpacker/hiker/treker is on the move, they don't rappel down a cliff because it's fun - they rappel down a cliff because its between where they are now and where they want to be. That means that the rope they use to climb down needs to be un-tied and repacked so that they can use it again. But how do they get their rope back when it's tied to that tree at the top of the cliff? They use a sheepshank.
One end is tied to the tree at the top, and a sheepshank is tied as close to the tree as possible. The section of rope labeled B is cut. The climber can still safely descend because there is no tension on this part of the rope. Because the sheepshank is only tight when under tension, once at the bottom, the rope is given a few shakes, and the knot comes undone. The short section between the tree and the cut stays tied at the top, but the rest falls down allowing the trek to continue.
Tying a sheepshank on a damaged piece of rope can prevent further damage from occurring. Much like cutting the rope still allowed the rock climber to use it, if a damaged section of rope is placed in the length labeled B, no tension will be acting on that part of the rope thereby sparing further abuse.
/ HH2 \
/ ______ \
_____________ __________________/___/______\ \____
| \/ A | | \
|___________ / ____________________________| |_ \
\/ / | | | | \ \
/ /\ | | | | | |
/ / \ | | | | | |
/ /\ \ | | | | | |
_______/___/__\ \____________|___|________| |_/ /
/ \ \ B / / /
/ _____________\ \_____________________/ /_____/
| / | | | | \ \ / /
| | | | | | \ \/ /
| | | | | | \ \ /
| | | | | | \ \/
| \_|___|________| |_______________/\ \___________
\ | | C \ |
\ \______/ /
\ HH1 /
Thanks again to tkil for his node on drawing knots with ascii art. It's not as easy as it looks.