A picture frame is ideal for displaying artwork such as paintings, digital prints and photographs.
The artwork is placed under glass/perspex, and sometimes has a mount/matt surrounding it to provide a border. Picture frames have a wide range of standard heights and widths, however are limited when framing 3D, or thicker items.
A Shadow box frame is designed to display these three dimensional objects, as these frames are deeper. Shadow Box / Craft Frames usually have a wooden spacer to stop the glass/perspex front from touching the item. From buttons, scrabble pieces, mosaics, flowers and shells, a shadow box can be used to frame them.
Shadow boxes can also be used to display flat artwork, such as paintings and photographs, to give a "floating" 3D effect, which the art being placed at the back of the frame, with the glass/perspex at the front of the frame, being divided by a spacer.
So while both picture frames and shadow boxes are used for display purposes, the main difference is that shadow boxes are designed to accommodate and display three-dimensional objects, while picture frames are generally used for displaying photographs or two-dimensional artwork.