A shy and fearful dog is a rather heartbreaking notion, but unfortunately, not too uncommon. Whether a dog is scared as a result of past abuse and abandonment or for something comparatively simple such as the appearance of a new puppy at home, frightened canine behavior is indeed a dilemma.
Take things slowly. When trying to get a shy dog to overcome his fear, go about it at the dog's pace. Never coerce the dog into things that may frighten him, whether it's being around large groups of people in your living room or snuggling up to him. Play it calm and cool, and give the doggie the opportunity to approach you -- at his own volition -- when he feels that he can. When this occurs, behave calmly and deliberately. Remember, this dog may be very afraid of physical contact and loud voices.
Create positive associations. Get on good terms with the scared doggie by establishing some "feel good" links to you. Feed the dog his supper using your hands, and talk to him gently and soothingly as you do so. Also try this with treats. Once the cutie seems to be feeling more comfortable with the situation, begin petting him each time right before you offer up the yummy morsel. In some cases, an especially fearful canine may run away before you get the opportunity hand-feed him. If this is your case, simply place a few bites by his "comfort zone." One he emerges, the first thing he'll see -- and eat -- will be there waiting for him. Voila -- positive association to you.
Give him a watered down version of his biggest fear. Whether it's the mere sight of people or something more specific such as small and loud children, begin exposing the shy one to things that make him nervous and shy. For example, let your dog observe a playing child from afar for a few minutes. Once you remove the pooch from the situation, immediately give him a treat to teach him that the child is absolutely nothing to fear. A beloved toy also make work. Keep repeating this pattern every day or so, and make sure that each time, he slowly but surely is closer to the child.
Speak in a soothing and soft voice when you interact with a shy dog. A loud and commanding voice will do nothing but heighten the cutie's general fear -- definitely not the desired result.