Here is a video of Shawn Johnson's bars from a few years ago. She used to have very closed shoulders. Watch the first few handstands - she has a definite shoulder angle. A few times she casts to handstand, quickly straightens this angle, then goes back to a closed shoulder angle. You can even see this in her kips and swings under the bar. YouTube - 2006 Gymnix Shawn Johnson Uneven Bars Event Final
Now watch this video of Nastia Liuken. You can see she fully extends her shoulders and reaches a true straight handstand and full extension in her kips. This is partly why the Chinese are known for their bar work - they always have very open shoulders. This straight body line makes for cleaner, better swings on bars. YouTube - Nastia Liukin - 2008 American Cup - Uneven Bars
As Jes said - open shoulders means the arms are behind the ear, closed shoulders the arms are in front of the ear. Shoulder flexibility is really important here - you won't be able to have open shoulders without good shoulder flexibility.