Among many other things, the cinematography is best among live action films at the time

Shrek has continued to raise the bar in CG character animation and simulation for hair, fur, cloth,
fire, water and global illumination. A Decade of 'Shrek' Tech by Bill Desowitz

Just think: there were 600+ character controls in Shrek compared to nearly 850 for Shrek 2, 1,083
for Shrek the Third and more than 1,200 for Forever After.

"There has always been the Shrek path of doing things and then all of the other shows, so one of
the key things I did early on with rigging was add more squash-and-stretch to give it more life and
make the characters seem less like puppets," explains Jason Reisig, head of character animation on
the fourth Shrek.

"We retrofitted the Shrek characters to have the new skeletal structure that we've been developing,
which allowed the characters to be looser and more expressive and more natural. Shrek's spine had
always been very rigid and when he's flying around the broom chase, he gets into stretched out
poses for the first time. But you have to be careful with Shrek's face because it looks weird and
goes off model quickly. However, with Rumpelstiltskin, there were no barriers: he's an
exaggerated personality."

Puss in Boots required a whole new set of tools in Shrek 2 to handle his fur, belt and feather plume in his hat.

According to Darin Grant, head of production technology, there's an ear trumpeting gag
introduced by Shrek and the other ogres that never could've previously been done as a result of the
retrofitting. "There's a line, 'I didn't know we could do that,' which turns out to be true because on
Shrek his ears had to be individually animated, and then on Shrek 3 we developed some secondary
motion systems to allow the ear movement to be more simulated based on head movement."
Constantly developing new tools, new software

https://www.digitalmediafx.com/Shrek/shrekfeature04.html
Layers
Layering shrek characters

Layering Shrek Characters (https://www.digitalmediafx.com/Shrek/shrekfeature04.html)
PDI (a subsidiary of DreamWorks and the animation company behind ANTZ)
Using a layering system that is based on human anatomy, the PDI team was able to properly
convey a wide range of emotions, attitudes, and expressions. Here's how it works, according
to DreamWorks:

"Essentially, the skull of the characters is formed in the computer and covered with computer
recreations of the actual muscles of the face. The skin is then layered over and programmed
to respond to the manipulations of the muscles as would a human face, complete with
wrinkles, laugh lines, and other imperfections. Hundreds of controls are wired into the face
like human nerves, enabling the animators to go far beyond the speech phonemes for the
correct lip-synch."

The complexity of the software allowed PDI to apply percentages to command combinations
in order to achieve the desired expression.

The same type of layering worked for the body of each character, as well. A skeleton was
built then populated with layers of muscles, skin, and even clothing. PDI used what they call a
"Sharper" program for the deformations of skin and clothing. According to DreamWorks, the
Sharper program, "is a layering process that deforms the surface from the inside out. When
you modify the innermost layer, the change extends outward to ultimately change the exterior
shape. It is taken from the same principle that causes your arm muscle to flex when you bend
your arm."

PDI used a shader (these programs have names, but PDI is being quiet about what software
it uses) to assist with its rendering in order to achieve realistic skin for all the characters. This
involves changing various rendering properties like the changing of textures (should the
princess have smooth skin or bumpy skin?) and other specular controls.

PDI animation Using special tools called "shapers," 

In addition to breaking the mold of fairy-tale conventions, "Shrek" also showcases some
amazing breakthroughs in what have been referred to as the "Holy Grails" of computer
animation, the first being realistic humans, who are able to express both dialogue and
emotion through a complex facial animation system developed at PDI.
The performances in "Shrek" were greatly enhanced by PDI/DreamWorks' proprietary facial
animation system, representing a giant leap forward from its first application in Antz (1998).
Whereas Antz (1998) was almost entirely populated by, well, ants, "Shrek" is the first
computer animated film to star humans, including the title character.
Using special tools called "shapers," the animators were able to achieve sophisticated facial
and body movements by applying interacting layers of bone, muscle fat, skin and, finally, hair
and clothing or, as in the case of the Donkey, fur. There are also advances in the creation of
rich, organic natural environments; clothing that moves, wrinkles and reacts to light like real-
life fabric; fire; and fluids of different viscosities, achieved using PDI/DreamWorks' Fluid
Animation System (FLU), which won an Academy Award® for Technical Achievement in 1999.
"The computer has been revolutionary in animation-not evolutionary, revolutionary. There is
absolutely no question that 'Shrek' is far and above anything that's been done in computer
animation," says Katzenberg, who is quick to qualify, "for at least ten seconds. Yes, it's state
of the art, but do I think it will be the benchmark for a long time to come? No. It will be the
benchmark for about a day or two. I say that with a sense of humor, but that's what's exciting
about computer animation; it's evolving- and exponentially. With today's digital tools, it seems
if we can dream it, we can make it. "