Why does alcohol reduce shyness? I find it very interesting that people who consume alcohol get less shy. 

Therefore my question:

Why does drinking alcohol reduce shyness?

And are there any other (legal or illegal) substances who have such an effect on the human brain?
It has to do with the excitatory affect alcohol has on almost all neurotransmitters and their receptors, including serotonin, dopamine, and GABA.

Very, very broadly: 
Serotonin: Generally makes one seek a human connection.
Dopamine: Motivation to do things that are stimulating, like conversation.
Gaba: Surpresses anxiety.

GHB will do this even more - but it may do it to way too much of an extent.  (Mostly Gaba, but increases tyrosine hydroxylase as well which = more dopamine.)
MDMA obviously (it causes your serotonin receptors to instead of soaking up the neurotransmitter pump them out).
Amphetamines to an extent.  (Similar to the last two)