If the file that this script lives in is executable, the hash-bang (#!) tells the operating system what interpreter to use to run the script. In this case it's /bin/sh, for example.
There's a Wikipedia article about it for more information.
The first line tells the shell that if you execute the script directly (./run.sh; as opposed to /bin/sh run.sh), it should use that program (/bin/sh in this case) to interpret it.
You can also use it to pass arguments, commonly -e (exit on error), or use other programs (/bin/awk, /usr/bin/perl, etc).
#!/bin/sh or #!/bin/bash has to be first line of the script because if you don't use it on the first line then the system will treat all the commands in that script as different commands. If the first line is #!/bin/sh then it will consider all commands as a one script and it will show the that this file is running in ps command and not the commands inside the file.
./echo.sh
ps -ef |grep echo
trainee 3036 2717 0 16:24 pts/0 00:00:00 /bin/sh ./echo.sh
root 3042 2912 0 16:24 pts/1 00:00:00 grep --color=auto echo
When you try to execute a program in unix (one with the executable bit set), the operating system will look at the first few bytes of the file. These form the so-called "magic number", which can be used to decide the format of the program and how to execute it.
#! corresponds to the magic number 0x2321 (look it up in an ascii table). When the system sees that the magic number, it knows that it is dealing with a text script and reads until the next \n (there is a limit, but it escapes me atm). Having identified the interpreter (the first argument after the shebang) it will call the interpreter.
Other files also have magic numbers. Try looking at a bitmap (.BMP) file via less and you will see the first two characters are BM. This magic number denotes that the file is indeed a bitmap.
Source: Stackoverflow.com