We have developed a modular rheo-optical apparatus to study the flow properties of liquid crystals. Its main components are shearing device, strong magnetic field, and optical microscope. We performed experiments on well defined initial morphologies with uniform molecular alignment. The monodomains were achieved with strong magnetic fields (4.7T). Time resolved conoscopy is the primary optical technique in our investigation. We propose a simple relation between the distribution of alignment angles over the sample thickness and the conoscopically measured angle, to quantitatively measure the alignment angle in shear flow. We followed the relaxation of a shear induced splay deformation in small molecule model systems (N-(p-methoxybenzylidene)-p-butyl aniline (MBBA), pentyl-cyano-biphenyl (5CB) and a commercially available mixture OMI4244, and devised a model, based on the diffusion equation, to determine the rotational diffusivity from the relaxation process. The director alignment behavior of the SMLC's in shear flow is well described by the two dimensional Leslie-Ericksen model. The effect of director elasticity can clearly be seen in our experiments, resulting in a decrease of the steady state alignment angle at smaller Ericksen numbers. We found that there is no strain rate dependence of the director vorticity from 0.002/s to 2/s for poly-($\gamma$-benzyl-D/L-glutamate) (PBG). We determined ${\alpha\sb2/\alpha\sb3}$ = 44 for a 20% solution of 280.000 molecular weight PBG in m-cresol at 20$\sp\circ$C. The conoscopic interference pattern vanished after 8 strain units from an initially planar alignment and shearing could be reversed up to 10 strain units to completely recover the initial monodomain. Liquid crystalline polymers (LCP) are known to arrange into periodic director patterns during flow. We studied this for shear flow of lyotropic poly $\gamma$-(benzyl-glutamate) as a model system, which is a well characterized synthetic poly ($\alpha$ amino acid) with rigid chain architecture and well defined conformations. The molecules were are aligned uniformly as the starting condition. This so called monodomain morphology was obtained by use of strong magnetic fields. The shear apparatus is placed in an optical microscope, which is set up for conoscopy to allow direct observation of the shear induced rotation of the molecules. After a small strain during which the molecules rotate around the vorticity axis, they 'break out' sideways and form a three dimensional spatially periodic pattern. The shear induced instabilities have been observed under crossed polars as spatially periodic patterns (bands), some researchers observing them during flow and and others after cessation of shearing$\sp{(27, 42, 58, 59)}$. Bands, which develop during shear flow of poly (benzyl glutamate) (PBG) have been reported in 1980$\sp{(36)}$. However, later workers have failed to reproduce their findings and periodic pattern are believed to occur only after cessation of flow. Our findings solve a long standing controversy in the literature about the formation of periodic director pattern during flow. By varying the initial molecular orientation with respect to the flow direction we could show that the periodic pattern does not depend on the shear direction; it is governed by the director of the initial monodomain.