The Stone Shard is obtained by defeating and looting a Stone Golem. You can find the Stone Golem in the cave on your right as you head towards the Crypt near the start of the game.
It can also be obtained in the small cave along the wall of the canyon below the main path to the Vilands without having to kill the golem there.
The following spells are available when using this shard:
Stone skin - add 80 armor and 100 weight for 60 seconds