Is a projection file (.prj) essential for a shapefile?

A projection file (.prj) is not strictly mandatory for a shapefile, but it is highly recommended for optimal usage, making the choice of "No, but it is ideal" the most appropriate.

A shapefile primarily consists of at least three essential files: the .shp (shape format), .shx (shape index format), and .dbf (attribute format). The presence of a .prj file, which stores the coordinate system and projection information for the shapefile, enhances the usability of the spatial data. Without this file, other users or systems may not know the correct geographic context or coordinate system in which the spatial data is meant to be interpreted, potentially leading to mapping errors or misalignment when overlaying data from different sources.

Having a .prj file can significantly improve the ease of sharing the shapefile and working with it in various GIS applications, as these programs often depend on the projection information to properly render and analyze the spatial data. Therefore, while the absence of a .prj file doesn’t prevent the shapefile from functioning, its inclusion is considered best practice within the GIS community.