They are both a hardware _and_ software requirement.

Pixel shaders (and shaders in general) are part of your video card (or GPU) hardware. However, you also need a version of DirectX or OpenGL* recent enough that it'll be able to take advantage of your video card's capabilities - otherwise they might as well not exist.

Without too much detail: shaders are part of the rendering process. They do a tremendous amount with very little resources and they're largely responsible for your games looking _totally awesome_, so basically every game developer will be using them.

<sup>* In case you are unaware of their role, DirectX and OpenGL are drivers which act as the go-between between your game and your video card.</sup>

### Can't run the shader version your game demands? ###
Wikipedia has a list which covers [the maximum shader version supported by various video card series][1]. Check that your system has a recent enough version of DirectX ([here's how to do that][2]) - Windows Update will normally keep that up to date, then pick a series from that list that covers your version and go buy a new video card.

Pixel Shader 3.0 specifically was released in 2004, so judging by how old it is, video cards that don't support it probably aren't even _sold_ anymore,

[1]:http://en.wikipedia.org/wiki/Pixel_shader#Hardware
[2]:http://www.webcam123.com/en/directx.html