Disambiguation : This page is about Shell script.
.sh - Shell Scripts
The name of a shell script sometimes ends with a .sh (To let let the user know that the file is a shell script). This is a bad practice1, that is often used on some broken Operating systems, that don't understand the content of files. See Wikipedia's Shebang (Unix)
/bin/sh - The Shell Interpreter
The /bin/sh shell, see Shell
If one later re-write the 'program' in another programming language, Calling programs would need to be updated to call the new program... or worse, handle both names. (1)