The Shredder is pictured very briefly in a recap at the beginning of the movie, but does not appear in the story itself.
Director Kevin Munroe says:
As for Shredder in TMNT, yeah, I saw a lot of people saying he'll be making a cameo. We have nods to him in the film, but there isn't a scene with him or anything. But again, I wouldn't say he's gone from the franchise...
Producer Tom Gray (in the IGN interview) stated they had felt they had done Shredder to death by this point with comics, TV shows, and first two movies, so they wanted to take a break from him so they could use and introduce some other villains.
There is a hint that the Shredder may appear in a sequel, and Munroe has more to say on that point in an interview (reported here
Because we now have these sort of better Shredder stories of how to bring Shredder back. But now if it works out well, and Karai coming to New York, that's a setup for a really good volume in The Turtles in the comics as well, it could work out to a really cool sequel.
He is referring to the City at War arc from the Mirage comics, in which Karai temporarily takes on the mantle of the Shredder. So it is possible that if we see the Shredder in a sequel, it will be Karai and not Oroku Saki wearing the armor. This is supported by past statements by Peter Laird that he does not want Saki to return.