what happened? what's wrong with using soap? I've used soap before and it was fine except it made my hair feel more coarse.
For shorter hair it should be fine if you don't have a sensitive scalp. But for people with medium/longer build hair.. by medium I mean probably most hair is 3-4 inches or longer, it can irritate the scalp and natural oiling process on your head.
The difference between soap and shampoo.. you know what soap's made up of right? From tallow off cows, or palm oil mixture, or --as fight club showed-- human fat.
Basic chemistry will show that if you mix up this compound with another compound solution type from the earth metal section (IIA on the periodic chart) - AKA alkaline metal, it will become more like a salt.
Whatcha think happens when you mix salt on something and rub it against a solid? It acts like an active cleaner, where the salt base in the solution acts like the scrubber. This is the basic process of soap.
That's what soap does, the whole process is this tiny example blown up and with more random chemicals added like that scent stuff, color, etc.
Shampoo has similar chemicals added into the solution, but there's one difference in it - the chems added into it that changes the purpose of the overall solution. Rather than just cleanse off the oil, there's some mixtures inside of a shampoo:
- Acids
- Preservatives
- Conditioner - chemical stuff like allantoin, what it does is cover the hair and act like a coating so it is easier to move around and do what you want.. kind of like "adult gel" ya know what i'm saying? lol
There's probably some more but I don't remember what they are.
If you take a general chem course above introductory level, you'll get into these and see whats it all about.
Here's a link I just found that might help you understand more in depth of the process
What is the difference between soap and shampoo?
How does hair feel like?? Where did you heard from?? 
