Shell inlay like that used to be fairly common on Classical guitars, but fell out of favor when the more austere Spanish instruments became fashionable, as far as I can tell. The guitar the Flamenca plays in 'Casablanca' has a lot of shell on it. Much of the pearl work on those old instruments was not all that carefully cut, but it certainly was flashy.
To continue where Michael left off, once the shell is set in the mastic it can be leveled off, and the lines engraved. These could be filled in either with more mastic or with engraver's wax. These days a lot of us set shell in either black cyanoacrylate glue or a mix of epoxy and ebony dust. It's more common to do such inlay into ebony than anything else. In part it shows up better, but it's also much more difficult to inlay into a light wood and do a neat job. It's hard to find a light colored filler material that won't show on spruce or maple, although the violin maker's lycopodium comes pretty close. Some of the older guitars would cut very sloppy pockets for the inlay, filling in with gobs of mastic, and black is the easiest color to match.