The sword guarantees a decapitation with every killing blow; however, it will initially suck away the user's health. But for every soul it's fed, it'll provide the player with a boost to health and speed. The ability stacks, up to four kills.
The shield takes the place of the sticky bomb launcher and, once equipped, provides +50% fire damage resistance and +65% blast damage resistance. From a combative standpoint, using alt-fire while equipping the shield will cause the Demoman to charge at ludicrous speed towards an enemy, doling out some serious damage should he connect. Also, doing that will give the Demoman the chance to attack with his sword mid-charge, providing greater chance to up the damage count.