Basically, shaft droop is the amount the shaft bows on the downswing. Here's a picture of that.
Shaft droop is more noticeable in longer clubs and thusly it impacts the shots more with longer clubs.
Sometimes shaft droop is called 'toe droop', but from my understanding they are pretty much the same thing, but more applies to the droop on irons because the shaft doesn't bow as much, but the toe certainly droops downward. Here's a pic showing toe droop/shaft droop with an iron.
Thus, the effects of shaft droop are greater for say a 4-iron over an 8-iron.
The main worry about 'shaft droop' is that the more shaft droop makes it more difficult for the golfer to return the clubface to the ball in a consistent manner.
According to Tom Wishon:
The amount of droop is determined by:This is where 'PUREing' comes in. According to SST, the main company known for 'PUREing' shafts, this process helps minimize shaft droop. However, there are plenty of people that support SST's claims and plenty of people who claim it's just hogwash.
1) amount of radial acceleration and centrifugal force applied by the golfer.
2) stiffness design of the shaft in relation to those forces.
3) weight of the head.
4) distance that the Center of Gravity of the head is away from the centerline of the shaft.