After years of speculation, we've finally been able to see what's underneath the mask of the Shy Guy. The footage comes from Mario Power Tennis, in which Shy Guy drops his mask mid game. As you can see, Luigi is horrified.
SupperMarioBroth managed to spin the camera around to give us a look as to what Luigi is looking at...
HE'S A GHOST! It would be awesome if Nintendo would confirm this and make it canon, but it's more likely the developers didn't foresee someone unlocking the camera to see what's on the other side. Still cool either way!