Shamatha (calm abiding) is the capacity to abide in vividly clear experience without reacting (fighting, fleeing, or freezing). This non-reactive capacity comes from focusing on a chosen object, or from resting in the experience of the chosen object. Classic objects are the breath, body sensation, a physical object, a mental image, or the totality of experience. There is no shamatha separate from stable abiding in vivid experience as it arises.
Vipashyana (clear seeing or insight) is “looking” (non-conceptually examining and sensing) experience to know its actual nature: not permanent, not separate, not self, not satisfying. The result is knowing directly that every internal experience and external object is “empty” of any imagined characteristics. There is no insight or thing that is “emptiness” separate from knowing the nature of experience as it arises.
Shamatha calms habits of emotional turmoil and struggle -- the habit-patterns are interrupted temporarily. Shamatha is necessary for insight.
Vipashyana cuts the confusion at the root of turmoil and struggle. Vipashyana is necessary for freedom.
If we can't be non-reactive in experience, we need shamatha.
If confusion and struggle still arise, we need vipashyana.
Mahamudra is the effortless union of shamatha (calm abiding) and vipashyana (knowing).