"To shortlist" means you choose the better ones from all the applicants or candidates and form a shorter list of names. From this shorter list of a few names, a final winner will be selected.
If you are shortlisted, it means you have succeeded in the initial rounds of selection. You will be one of the few candidates who will go into the final selection.
Non-humans can be shortlisted. Example: I have shortlisted three cars, from which I shall choose one to buy. Example: His novel is one of three shortlisted for the Booker Literary Prize.