Shredding occurs when the hook hits or collides with the top thread loop as the hook passes the needle. (the machines timing would need adjusted to correct this)
The hook point is very sharp and will damage the thread when it hits it. This causes the thread to splay or fray apart and get hit even more until it breaks. It will sometimes tie different pieces of the thread into a knot in the take-up lever hole because the thread is going back and forth through it. Thread damage is often seen on the quilt top when this happens.
Shredding can also be caused when something else abrades the thread, such as damaged thread guides.
Thread can wear grooves into steel guides over time. It causes damage to the top thread until the thread shreds or breaks and then skipping occurs. Occasionally the thread will actually break and re-catch itself once again and sew further.