What is Shmita and how is it observed?

Your question is much too broad for a full answer here. Shmitta is the seventh year, or Sabbatical year and the Torah sets out the basic lines of obsevance in Vayikra chapter 25. The main areas of Halachic concerns are : 1. Prohibitions on a variety of agricultural work. This includes private gardens and in some cases house plants. 2. The relinquishing of ownership of the produce of the seventh year. (This produce is then freed from the obligations of Trumot and Ma'asrot) 3. Holiness of that produce which demands special care in its usage and disposal. 4. Relinquishing debts incurred by loans in previous years. Each of these areas has a vast literature and the actual observance varies from community to community. I suggest you try to find a guide to the laws of Shmitta in a Sefarim store (there are some in English) and consult with a Rabbi in your own community as to observance where you live.