I have just started building my first electric guitar and just when i thought i had everything sorted i hear that the electronics cavities have to be copper sheilded. Im sure this isnt that difficult but is it necessary? What does it do? Is this how the guitar is grounded?
It's definitely not necessary, but its almost always worth doing. What it does is block radio waves from interfering with your guitar signal. Basically it helps to reduce hum and noise.

Here's a good article to read about how to do it:

The guitar they use is a strat but pretty much all of the info applies to all other guitars.
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Quote by handbanana
wiliscool is just plain dumb
its a cheap mod/thing to do when building a guitar that is very much worth it. The above post hit the nail on the head.
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One side of the output jack is 'hot' (the tip) and the other is 'ground' (the sleeve). Usually all of the things that need to be grounded are connected to the back of one of the pots. This includes the bridge ground and the jack ground. If you shield the cavity you'll probably connect that to ground too.
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Quote by handbanana
wiliscool is just plain dumb
Always ground a shield. If you don't it won't do anything.

In addition to blocking RF, it also blocks EMI from things like CRTs and flourescent lights.

Very worthwhile mod. If done right, it will silence most any guitar.

a user here named lumberjack had severe noise problems with his guitar, and after researching the subject, he learned proper shielding techniques and made the guitar "as quiet as a graveyard" (I think those were his exact words). His thread is linked in the wiring thread, as a matter of fact.