Story-related and unmissable. The Shadow of Yharnam is the boss of the Forbidden Woods area, and it is actually three bosses that you must fight at once. Because of this, this boss becomes significantly easiest in co-op, as you and your partners can each take on a different Shadow.
Either way, the best way to approach this fight is to lower the health of each Shadow before killing any of them. The reason for this is that the Shadows get stronger when one of them dies, and again when another one of them dies. See the following video guide: