the picture you posted, with the blue, is a beadboard, not shiplap. That's called a wainscot.
as for the mirror, if it lays flat on a wall, it will lay flat on the shiplap. you would not cut the boards out around it.
this is shiplap from the floor to the ceiling, w/the baseboard on the bottom and a crown trim at the topyou can also use a tongue and groove type of board too.
Beadboard is this, and it's done in this wainscot style. Basically the bottom portion of the wall, a rail trim piece and paint above that. It can be vertical like this, or horizontal. they make this in a vinyl so that its able to withstand the humidity changes in a bathroom. Real wood in a bathroom needs to have very good ventilation.
panel wainscot
if you're having a little shelf alcove, and the wall next to it has the shiplap or wainscot, then you should carry it around just to make it cohesive. If that neighboring wall is the only wall w/the shiplap/beadboard, then you wouldn't have to wrap around the shelving area. To me, it looks better if you do.
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wood wall accent and lighting
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