Shen's parents were two peacocks that lived in Gongmen City. When Shen wished to use the gunpowder in the fireworks to make into his cannons, his parents were worried and contacted a Soothsayer. When he overheard the Soothsayer foretelling his parents that if Shen were to continue his path of darkness, he'd be defeated by a "warrior of black and white", rather than set a better goal, Shen instead led a massacre on an innocent panda village to avert the prophecy. With the massacre complete, Shen returned to his parents with a very disturbing and very creepy look of pride on his face. But his parents were horrified that their son would do such an evil deed. As punishment, Shen's parents banished him forever, but Shen swore revenge that he'd return one day, and all of China would bow to him.
Presumably shortly after the banishment, Shen parents died of despair and broken hearts, giving their power to the Kung Fu Council.
They are only seen in the intro and later the credits. They are two peacocks only seen in artwork.