I guess this information should be in this thread: HOW TO USE SHADOWMELD.
At first, as a rogue, I thought that Shadowmeld was just a lesser version of Stealth and was of no real use to a rogue, except for its passive effect (improved Stealth). Big mistake. I have since learnt to make the best out of my night elf racial ability and would like to share it with you so that the less experienced night elf rogues can use their racial at its fullest.
Note that Shadowmeld and Sleath are on different timers.
Sometimes, you want to restealth but stealth is on CD (10 sec without Camo, 5 sec with 5/5 Camo). If you're not exiting from combat, at those times, Shadowmeld will usually be up. So you can Shadowmeld, wait a few seconds without moving (else Shadowmeld breaks), Stealth and move on as usually.
In short, Shadowmeld allows you to restealth before Stealth's CD is over (only limitation: don't move before you can restealth).
Example of uses: in a BG, you're stealthed and need to take an action that will break stealth, such as talking to a NPC, drinking a potion, bandaging, etc. You can't restealth immediately which is a pain since those few seconds can get you targetted and killed. Just Shadowmeld and you're safe until you can restealth. This means that you're out of stealth just one second, then back into Shadowmeld. The risk that you get targeted in this mere second is very low.
I've even used this in arena to disappear from sight behind a pillar and get the few seconds I needed to restealth.
nostra