Shadow Copy is a feature of Vista that allows previous versions of files (point-in-time copies) to be saved and restored if needed, a sort of ‘backup’ system. See here and here for more information on Shadow Copies. The Volume Shadow Copy service is the main coordination component of this feature. Though a hardware based ‘provider’ is the fastest method of creating shadow copies, not all hardware and software are designed to work with this configuration. That’s where the Software Shadow Copy Provider service comes into play. It intercepts and processes disk requests between the file system and the volume manager software. If you haven’t enabled the Shadow Copies feature on any disks, then this service is not needed, but as it is set to manual by default, there is no benefit to disabling it.