In actual fact there is 'St Louis Shag', 'Carolina Shag' & 'Collegiate Shag' - each of which are thought to be completely unrelated dance styles.

Carolina Shag is a lead oriented dance where the leader "peacocks" a variety of complex improvisations, while the follower performs subtle (or no) footwork variations.
Carolina Shag started from guys in the 1950s competing against each other at clubs at the beach. A lady kept it smooth so she could keep her hair-do nice, not get too hot and most importantly hold her beer while they danced. The Shag is heavily tied into Southern identity & sociability. It has a distinctly West Coast Swing / Latin Ballroom look about it.

St. Louis Shag seems to be more closely related to the Lindy Hop break away - its a fast dance style, but seems ultimately to be quite limited.

'Collegiate Shag' is by far the most common 'Shag' - the upper body and hips hardly move as the legs do convoluted kicks and fancy footwork 'slow, slow, quick, quick...' Its an impressive dance style and works especially well to fast tempo music.
Shag, at least in its Collegiate form, may have developed from early foxtrot (before the foxtrot footwork became standardised), however an alternative theory suggests the name 'Shag' was coined by old-time Vaudeville Entertainers - it seems possible that Shag came from early 'esoteric' dancers lampooning Jitterbugs exaggerated wild arm and leg movements.

This is what wikipedia says about Collegiate Shag

Some nice clips of various Shag styles

Collegiate Shag Carolina Shag St. Louis Shag



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