#!/bin/sh at the begining allows the script to be run writing just myscript.sh instead of sh myscript.sh on the command line.
For this to work you may need to set the file as executable (chmod +x <filename>.sh)
You can pass arguments to a script the same way you pass them to a function
# Command line
./my-script.sh arg1 arg2
# Script
echo "$1 - $2"
# will print
# arg1 - arg2
If you copy or move a script without the .sh to a folder in the PATH it can be executed as a command line tool. For example:
$ cp my-script.sh /usr/bin/my-script
# Execute it
$ my-script