A machine shop is a facility with equipment and supplies for machining, a process where parts are cut, fabricated, and finished to prepare them for use. Machine shops are used in the creation of new parts, as well as repairs of existing equipment and parts.
Machining is a form of manufacturing used to create objects out of metal. During this process, workers cut away materials to alter the appearance and shape of a product. Machining serves as an alternative to other forms of production processes, including molding or casting. It is one of the most effective methods of creating very fine, detailed objects, which are often not feasible through casting and molding techniques. Machining can be used to make everything from steel fasteners to metal jewelry, as well as larger objects like hand tools and automotive components. --wisegeek.com
Equipment like cars, aircraft, large engines, and manufacturing equipment can all spend some time in a machine shop when it is created or in need of repair.
Companies that manufacture such equipment usually have a machine shop on site for fabrication of new, custom, and test parts. Machine shops are also found in educational and research facilities, where people learn about machining in the context of repair, as well as fabricating parts for custom applications like developing equipment for use in experiments. --wisegeek.com