What exactly is terminal? What is shell?

I know about Linux terminal. I can also issue many advanced commands over terminal. But one simple concept is not clear to me. What is terminal and how does it work? I know about hardware which consists of CPU, RAM, HARD DISK and so on. I know about kernel which is basically the core of the operating system. I know about software which sits on the top of kernel. And I know about users. And I know that user uses either terminal or GUI to give instructions to the software.(or kernel?) Now please explain these concepts of terminal and shell. **Graphical explanation and simple non-technical words are preferable.**