There's a lot of confusion on this subject. In fact the reverse of what you say is nearer to the truth: Flash was (somewhat) rolled into Shockwave.
Bit of history: Shockwave was Macromedia's own baby, and debuted while Flash was quietly kicking around as another company's plugin, then known as "FutureSplash". About a year later, Macromedia bought that and rebranded it as "Shockwave Flash" to put it under the same brand as their existing product (perhaps a full merge of the products was planned back then, but it never happened for whatever reason; probably too much work). That's why Flash files have the .SWF extension.
Back then, the two products' use-cases hardly overlapped at all. Flash was simply an efficient (yes really!) way of bringing fancy animations and swanky UI "hotness" to the web. It wasn't much used as a platform for video because, well, nobody had the bandwidth to do much video-watching online.
Shockwave, by comparison, was a veritable Swiss Army knife of multimedia tools for both the web and other (often embedded/kiosk) platforms (it could create standalone executables, which came a bit later for Flash). Its big strengths were hardware-accelerated 3D animation (Flash still doesn't have this, and it was the massive new hotness at the time: lots of browser-based games and wanky corporate "walkthrough" features), embeddability of lots of contemporary media formats either in the box or via third-party plugins to the authoring app (Director), a well-thought-out GUI builder and powerful but accessible scripting language making it quite easy to pick up and use.
Back then you'd also see a lot of software installer CDs or multimedia CD-ROMs that used it: the Director icon on the "autorun.exe" file was a pretty common sight.
I doubt Director/Shockwave have had much love from Adobe over recent years, but I bet that they remain the go-to for a lot of embedded/kiosk GUI devs. It's been a long time since I saw anyone using it on the web though.