Though very small compared to most dogs at the park, your shih tzu would love for you to take her or him out to socialize with other dogs. Indeed, this most critical when they are still small puppies so they grow up without unreasonable fears of other dogs, new people and situations. However, it is important that you manage such new encounters as much as possible when your shih tzu pup is still impressionable, otherwise such adventures could potentially have the opposite effect.
Perhaps the best reason to make sure your shih tzu is well-socialized as a puppy is to prevent developing a fear biting response. Such animals are not trustworthy because they are so terrified, and being dogs, lead with their teeth in situations that are too tense for them to understand. Obviously, you want your shih tzu to be a companion that you can take with you anywhere.
Towards that end, there are plenty of things you can do to initiate contact with other people. For starters, make it a point to take your dog somewhere new, even if it's just slightly new, each day for the first 3 months you have her or him. This may simply mean a new corner of the same park you've been going to, but it's imperative that new smells and new people are encountered every day so your dog comes to expect that new things happen regularly.
Of course, some dogs that your your shih tzu meets won't be nearly as protective of your tiny dog's limbs and livelihood as you are. It is therefore your duty as something of a tour guide for your dog's first trip through the world.
Now that doesn't mean that you should pick your little dog up every time a large one approaches. In fact, that's just about the worst thing you could do - that just reinforces the idea that it's okay to freak out whenever a large dog approaches.
It's actually far better to manage the encounter by checking with the owner of the large dog to find out if they're friendly or not. If not, simply walk on the other side of the street. If they are, let them meet and greet as dogs do.
In fact, when it comes to meeting other dogs, it is best to let them make a bunch of noise and settle things. Dominance has nothing to do with size as far as dogs are concerned. Though shih tzus don't tend towards dominance, males sometimes can exert dominance over subordinate dogs of any size. Regardless of where your dog ends up in the hierarchy, there will be a terrible noise - try not to be alarmed; it's just how dogs establish an order.
Of course, when meeting children for the first time, you'll have to take even more care than you would with dogs. Unlike dogs, children don't know when to stop pulling or hitting or whatever it is they're doing. Unsupervised visits with children should NOT be allowed. They certainly can be come fast friends, but again, you need to take it careful.