Sheep aren't the smartest, most confident creatures. They're always clustering together as if they're ashamed to be alone. When you're sheepish, you're like a sheep — embarrassed and not confident.
The word sheepish can be used to describe how someone looks or acts. If you wear a sheepish grin, you're embarrassed. Similarly, if you're feeling a bit sheepish, you're probably wanting to hide away from the world. If you are acting sheepish, you probably don't want to take responsibility for your actions.