How does being put "on the shelf" work in the Mafia? I know Angelo Ruggerio was put on the shelf after the tapes...But what does it mean? Is the guy retired? Demoted? Does he still earn, is he still part of the Family after being put on the shelf?

I would think that there are different levels of being "put on the shelf". Sometimes a member is punished by temporarily being prohibited to participate in family activities and all contact with other members is severed. This lasts as long as the boss considers that the member may be reinstated. Such punishment can range from a few months to several years.
The worst punishment (if we disregard the punishment of being killed that is) is when a member is totally ousted. Crazy Joey Gallo, for example, became a total outcast and considered as a "persona non grata". I´m not sure when Gallo exactly was put on the shelf, but after the Colombo hit he also had a price on his head.

Ya being put on the shelf is almost as bad as a death sentence for mobsters since they are demoted and not making money. Its even worse for capos like Angleo ruggiero who was put on the shelf for a variety of reason. That tapes were part of it but also ruggiero messed up the hit on Anthony Casso which led to many Gambino members getting killed in retaliation

So, on a fictional note, could we say that Ralph Cifaretto was "put on the shelf" all those years down in Miami, until he reappeared to assume control of the Aprile Crew after Richie Aprile disappeared?

i dont think he was put on the shelf. He was probably running a racket down there since he was a major earner. Many mobsters run rackets in other states. For eaxmple gambino capo Frank piccolo was in Connetitcut and tony plate who was Neil Dellacroces hitman spent much of his time in florida