The "shi" in "shihan" basically means "teacher, master; exemplary person." "Han" in this case means "example, model, pattern."
In Aikikai at least, the term is not
used automatically when people reach 6th dan. There are plenty of people out there who are 6th dan who are not called "shihan" at that rank, especially outside of Japan. It seems that for those teachers teaching at Aikikai hombu dojo, though, they are given the title of "shihan" when they reach 6th dan, though; I do not think this is the case outside of there, though.
As I have read elsewhere in magazines and such, Aikikai Hombu Dojo has refused to acknowledge anyone who is not Japanese to be a shihan. Even recently on Aikido Journal, Stan Pranin reported
that at least one representative of Aikikai Hombu Dojo has said that even those instructors who are here in the United States who studied with the founder (ie Yamada sensei, Kanai sensei, Saotome sensei, et al) are not
recognized as shihan by Aikikai Hombu Dojo.
I will say, however, that I have heard of at least one instructor being conferred the title by his 8th dan teacher when he reached 6th dan. There are also those like Christian Tissier sensei who is 7th dan and is referred to as shihan. Also, other organizations outside of Aikikai like Yoshinkan have given the title of "shihan" to some of their non-Japanese, senior instructors.
With all of that said, it's a sticky issue. However, there are a handful of people with whom I have personally trained whom I would personally call "shihan" who have not been given the title by their organization. That's just my own opinion, of course...