It holds 8 shells and Tommy can carry 32 more. It's suited for short to medium range, but it shows it's true power at short range and close quarters combat. It is the only weapon in the game that doesn't lose unused rounds when reloading. The shotgun is also used by police when player reaches high enough wanted levels.
It is first seen in the mission The Priest where it's used by the Morello gangsters who come in the church at the end of the level. It can be seen and used in other levels from then on. In the mission A Trip to the Country, it is Tommy Angelo's main weapon.
You can find more real world information about the pump-action shotgun on its Wikipedia page.