(edit) To be clear, I'm not an expert, and it's been at least a decade since I've had to work with shader programming. My knowledge could be completely outdated.

Important to note that what happens when you skip it is exactly what happens with most games when you run them outside Steam (unless the game itself precompiles its shaders on first launch).

When the graphics library (Vulkan, OpenGL, or DirectX) needs to load a shader, it first checks the shader cache (or pipeline cache in Vulkan's case) to see if it can find the compiled bytecode. If the bytecode exists (hit), it is loaded directly into VRAM, much like the machine code of an executable. If it doesn't (miss), the shader first has to be compiled from its source code into bytecode. This is a CPU-bound operation, which can introduce performance issues (stutters, freezes) and spike the CPU usage. After that, the resulting bytecode is stored in the cache.

Steam does the same, but preemptively. It scans the game files and compiles and caches any shaders it can find. The difference is only in the timing.

Pretty much. I was playing BotW on an emulator that was using Vulkan and as I ran into new areas, or new enemies appeared it would stutter as things were compiling (it also has a debug option to tell me when new shaders were being compiled so I knew that’s what it was). I eventually switched to pre-compile. It took about 10 minutes, but after that everything ran silky smooth.

Thats my anecdotal experience, yes. God of War Ragnarok is nice enough to show it happening in the corner and it made it very apparent why I would get stuttering until it was mostly complete.

Same instructions from the other link posted, different source: https://forum.zorin.com/t/speeding-up-steam-shader-processing/50008

1. Navigate to ~/.steam/steam (This should be a symlink to wherever your Steam install is located). If the folder has a steam.sh then it is the correct folder.
2. Make a file called steam_dev.cfg
3. In that file put: unShaderBackgroundProcessingThreads x
4. Replace X with the number of threads to use. (See below.)
5. Save the file and restart Steam if it was running.

For X, modern processors generally support two threads a core. If you're using a 4 core processor, you could have 8 simultaneous threads. if you're using an 8 core, 16, etc. You don't want to use that number for X though, or Steam may hog your CPU enough to make your system sluggish. The original poster recommends your max threads, minus 4 to 6. I'm using 10 out of 16 threads, personally.

As the Reddit thread notes, despite the name of the setting, it does work for foreground processing as well as background. One thing the thread doesn't warn about is that if you keep Steam open and a game updates, Steam may start working on these in the background, if you have background shader processing turned on. If you're doing CPU intensive work, you may want to close Steam or turn off background shader processing to keep Steam from monopolizing your CPU.

Whoops, yeah should have probably put a link in the main thing,

here's a fourm post describing how to

There is a setting to pause downloads while playing a game

I used to let them complete but when I discovered the negligible difference I stopped. Crimson Desert helped cement that decision because Steam would compile them then the game would do sp after ot started.