Shade is slick, sly, quiet and underhanded. It's a sinister yet peaceful point of attack. The point of shade is to get your opponent upset and riled up while you sit there unbothered and enjoying life.
This is an important discussion since some of the children here have no idea what either means.
Shade is slick, it's sharp and it's especially clever. It's a particularly sly comment that registers as shady, but never outright rude or blunt. As Dorian Corey said in Paris Is Burning: "Shade is, ‘I don't tell you you're ugly, but I don't have to tell you because you know you're ugly.' And that's shade."
Dragging is a full-frontal assault, but it still requires a level of cunning to execute properly. It's letting a girl who is feeling herself a bit too much know that she ain't sh!t, never was sh!t and never will be sh!t. It's about snatching a bitch bald, leaving her scalp completely bare.
Between shade and dragging, shade is considered "classier" because it's underhanded. Dragging is backhanded.