However, what is terrible is that so many people are using them for their navigation system or for displaying their main content. And that is bad. For a start, they never give an alternative for the people who do not have and/or do not want the Flash/Shockwave plugin, or for those browsers that do not have a Flash/Shockwave plugin written for them yet. They are instantly turning away many potential customers. And, of course, the search engines can't understand your Flash or Shockwave menus so you are unlikely to appear very highly in their search rankings and you are unlikely to have many pages in their database at all.
Frequently, websites will contain a flash intro. Read my Intro Pages article to see why this is a bad idea. Others use Flash to assemble their page. For example, they'll start with a blank page and Flash will make menus and content fly into the page from different places. This is just wasting your visitors time. They do not want to see fancy animations, they want content and they want it now. You do not have the time to waste with fancy animations eating into the 5 seconds that you have to convince your new visitors to stay on your website. And to more experienced webmasters, it just makes you look unprofessional and makes you look like you have too much time on your hands (and no life).
Amazon doesn't bother with fancy Flash animations and they sell more on the internet than any other company in the world. Doesn't that tell you something?
People do not want fancy moving things on their page, when they click something, they want it to happen straight away and they do not want to have to wait for menus or content to "slide out".
Now that I've got that off my chest, I'd like to say that Flash and Shockwave are still great for those games and other novelty items that you see on the web so don't let me stop you from writing those. They can also be used as great ways of driving more traffic to your site if they are good enough for visitors to recommend them to other people. I never search for web based games but people always send me the really good ones and once I've had a play with the game(s), I tend to have a look around some of the rest of the site if it takes my interest. This kind of strategy is called Viral Marketting and can be extremely effective.
Just make sure you're using the right tool for the job.