The word "clay" has two definitions. It is both a grain size term, and a term referring to a layered silicate mineral which behaves plastically when wet and hardens upon drying or firing.
Shale is a very fine-grained rock composed of clay, mud, and silt. Shale is fissile; this means that it splits readily into thin, flat layers. There are quartz shales, feldspathic shales, chloritic shales, and micaceous shales, based on the composition of the silt-sized grains. The environmental interpretations of these shales are similar to those of the various types of sandstones.

Shale. Photo courtesy of Pamela Gore.
Claystone is a very fine-grained rock composed of tiny (less than 1/256 mm) clay minerals, mica, and quartz grains. The individual grains are too small to see with the naked eye or a hand lens, and the rock feels smooth to the touch (not gritty). Claystone is not fissile, and breaks irregularly.
Mud is defined as a mixture of silt and clay. Rocks with both silt and clay are referred to as mudstones or mudshales, depending on whether or not they are fissile.
Clay minerals are complex hydrous aluminosilicates with atoms arranged in layered or sheet structures. Types of clay minerals:

Pure, white kaolinite, a claystone mined in the upper Coastal Plain of Georgia.
Kaolinite is used in the manufacture of china, coatings for glossy paper, rubber, etc.
Photo courtesy of Pamela Gore.
Because of its fine grain size, clay tends to remain suspended in the water column. It will settle out of still, quiet water, given enough time.
Clays and shales typically indicate low energy environments, sheltered from waves and currents. They are commonly found in lacustrine, lagoon, and deeper water marine deposits.
September 17, 2005