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Shape Transformation (形態変化, Keitai Henka) is an advanced form of chakra control, and a technique that is pivotal for the manipulation of chakra and the creation of new techniques. It involves changing the form and movement of chakra, determining the size, range, and purpose of a technique.
The ultimate example of shape manipulation is the Rasengan, which is described as shape manipulation that has been taken "to the highest possible level". The Rasengan relies heavily on chakra control and does not require the use of hand seals. By building up on precepts learned from the Tree Climbing Practice and Water Surface Walking Practice chakra control exercises, the Rasengan is chakra that has been rotated and then compressed into the shape of a sphere.
Jinchūriki, when transforming through their progressive forms into their tailed beasts, have their chakra moulded around them to resemble the shape of their tailed beast. Through further transformations, the tailed beast chakra can materialize into the flesh and bone of the tailed beast. It's too, is a type of shape transformation.
Combining with Nature Transformation
Shape Transformation is one of two necessary techniques for creating or modifying a technique with its counterpart being Nature Transformation. While Shape Transformation changes the form and movement of chakra, Nature Transformation changes the actual nature of the chakra, altering its properties and characteristics. Because of this, a technique like the Rasengan can be turned into the Wind Release: Rasengan or Wind Release: Rasenshuriken. The cutting nature of Wind Release, combined with the spiralling movement of chakra, can change the chakra into millions of minuscule blades in a spiralling formation, as seen when Naruto Uzumaki used his Wind Release: Rasenshuriken against Kakuzu.
Sasuke Uchiha has also been seen using shape and nature transformation with the black flames of Amaterasu to create what is known as Blaze Release and the various techniques he uses that are derived from Chidori.