Microsoft: Difference Between Truncate and Shrink in Microsoft SQL

Shrinking actually shrinks the physical file.  For example, it reduces the size from 100MB to 50MB. However, truncating the log keeps the physical size the same but frees up space within it by removing committed transactions, once they have been backed up.


Reference:
Difference between truncating and shrinking a log
http://social.msdn.microsoft.com/forums/sqlserver/en-US/84f3f091-3915-445c-9935-6d665334412b/difference-between-truncating-and-shrinking-a-log