Emergency Stop buttons are used to stop all motion in an emergency, for example if a finger, hair, jewelry, etc becomes entangled in the machine. Industrially, E-Stop buttons are typically linked to the circuit breaker that powers the unit. For the shapeoko, there are two ways in which an E-Stop button can be implemented.
This method involves placing the E-Stop button between the wall power and the spindle and Arduino. This is more reliable (however I am unsure of its long-term effects on the steppers, PSU, and electronics). This would most easily be accomplished with a PowerSwitch Tail II (can toggle 120V 15A resistive loads) to switch the Power supply/Arduino off, as well as the spindle.
This method sends a signal to the Arduino to gracefully cause all stepper operations to cease, and (if equipped with a relay or PowerSwitch Tail), also stop the spindle.
Thoughts on the matter: I think the safest alternative would be a digital relay (for AC) to enable spindle power, which is held 'enabled' when the estop switch is in 'run' mode and supplying dc power to the grbl shield. In this way, hitting the estop will kill power to the shield (and steppers) and disable the relay supplying spindle power.