When measuring Chlorine levels, one can test total chlorine/combined chlorine and free cl.
Total or combined measures how much cl is "used up" but still present in the spa. This by-product of organics and cl is know as a chloramine. Free chlorine is cl that is availible to work.
By shocking, you seperate the organics from the cl. The organics leave the spa through oxidizartion (aka shock) in the form of a nitrogen gas. This is why you need to leave the cover off when you shock.