The shoulder is made up of three bones: the scapula (shoulder blade), the humerus (upper arm bone) and the clavicle (collarbone).  The shoulder joint capsule is a loose bag of tissue that completely surrounds the shoulder joint between the humerus and the scapula.  The joint capsule is made up of ligaments that form this watertight bag. 

A ligament is a soft tissue structure made up of connective tissue. Ligaments attach bones to bones. Inside the bag there is a small amount of joint fluid that lubricates the joint surfaces. This bag that makes up the joint capsule has a considerable amount of slack, loose tissue, so that the shoulder is unrestricted as it moves through its rather large range of motion.