When performing the Insta-Shield, Sonic vibrates the air molecules in front of him at sonic speed. This creates a brief force field that is dense enough to block Knuckles' punches and wilt metal spikes. This apparently creates some form of static electricity around Sonic's limbs. According to Knuckles, the Insta-Shield is painful to hit.
Sonic's first known usage of the Insta-Shield was on his first trip to the Floating Island where he used it to block a Pointdexter's spikes, much to Tails' surprise. He later used it again during a fight with Knuckles the Echidna on the same island.