I went to a dance class the other night and had a really good time with this one girl and she ended up offering me a ride home which I accepted. We walked 6 blocks before we got to her car and talked the whole way. I didn't end up doing anything because I have almost no experience physically with women and pretty much chickened out. I'm almost %100 certain she was looking to hook up. Anyways, has it ever been beneficial to anyone to state that you are shy or have little experience with women, or is better to just physically escalate things and not bring it up at all?

In these situations, its better to get close to her then just kiss her...

If you don't know how to communicate effectively you could just ruin the mood when you say "i'm shy." Women dont usually put themselves out there like that.

Noo
Admitting your shy is like saying "I'm a 10 year old"- they think your cute but will never take you seriously
Plus... Why? What do you even think saying "I'm shy" will accomplish? Do you think after you say that she'll start ripping off your clothes or something?

_________________
To game at your best you have to be willing to do your worst.

But if you want to... say.

"I'm shy. I want really want to kiss you and then have sex with you, but I am scared you won't like it. If you do want it please kiss and proceed to unbotton my pants."

Just physically escalate things and don't bring it up.
I think that you can only tell a woman that your shy if you are in a relationship with her.