The idea is that there is a mysterious city, a city seemingly built by nobody and everybody and controlled by an unknown (and powerful something). What makes this city special is that it's truely neutral in all things. All creatures, persons, agendas, and creeds are welcome, with one caveat. In the city center lays a pillar of some strange metal, on which is inscribed only one phrase, in all languages known (and many that are unknown): "Keep to the Shadows". Time has told the residents of the city what the phrase really means: do as you will, but keep out of sight. Those plots, plans, or fights wit witnesses find the instigators mangled around the central pillar, their blood staining the words that they have failed to heed. Nobody knows who or what enforces this edict, only that it is swift and extremely powerful. But the lure of so many services, knowledge, and freedom keeps the city well stocked with new faces.
A city like this practically breeds adventures and excitement. The players could be in the city looking for a hated enemy, valuable information, a rare item, or any other numbers of things that they might only find in such a free city as this. Conversely the players could be in the city hiding out from someone or something. Or things could be even more complex. Open fighting or combat is likely to be met with swift and messy death by the guardian of the city, so players hunting for an enemy would have to find a way to kill or otherwise remove the enemy from the city without being caught. Players could also find themselves caught in someone elses scheming. And finally, they could find themselves investigating the very nature of the city itself. Games could stop by the city for a few sessions or a small plotline and then leave, or the characters could find themselves in the city for even longer, but I wouldn't necessarily recommend it unless you have very good players and a good GM. The city should be a very very unforgiving place and all but the most skilled and careful of characters will find themselves dead very quickly if they linger.
As with the RPG uses, there are many stories that could come from such a city. I personally think that short stories and small character pieces would be best, highlighting the dangerous freedom of the city or the mysterious nature or even the bizarre collection of people and creatures that live together in the same place. Longer pieces could be done with it, though again I think the unforgiving nature of the place would mean a lack of characters that last long enough to build a longer feature around.
The City of Shadows was primarily concieved as a fantasy idea, something that could be plugged into most settings with minimal tweaking as I've written it here. The exact nature of the creatures and other inhabitants should be determined by the rest of the game or story world, but to keep it interesting it should have as many varieties of creatures (good, evil, and otherwise) as is feasable. Adapting it to other genres, however, is a bit of a mixed bag. Science Fiction provdes the easiest adaptation for the most part, instead of a ~city~ of shadows, an entire planet could be like this, the last refuge for the damned like Mistworld from the Deathstalker series by Simon Green. Barring that, it wouldn't be difficult to place the city on a strange or out of the way planet or place (like the dark side of Earth's moon). Technology might be utterly alien there or things might work strangely or not at all (a definate bonus for GMs using the city in a sci-fi setting). Modern day or near-future (like cyberpunk)...not so easy. The city could be high in difficult to reach mountains, underground, or might even be underwater (and revealed by a natural disaster or something.), but given the media saturation and other sorts of things, I think that it might not work as well as a mysterious and dangerous place. It fits in naturally to a horror setting (especially one like Call of Cthulhu or the like), though again a modern day aspect might complicate things (now sci-fi horror this would absolutely rock with however). So as you can see, there's many uses for the City of Shadows, as a backdrop, a setting, or a plot device in and of itself.
I kind of like this sort of format for posting the plot hooks, what about you? Encourages people to do more than just go "Look at this idea", it makes them think about what else can be done with the idea and maybe that thinking will spark another idea (either in the person posting or someone in the community). Also would keep people from just focusing one one aspect (story or RPG) over the other.