I think its really a sequel but not going too far deep on the whole story of Shenmue series.
Maybe it continues after Ryo and Shenfua at the cave, going back to the city, and start doing the "basic" things we have done on the true game, like trading figures, playing games and mini-games, talking to people, fishing(argh>_<), smashing random drunk people on the streets, etc... but not really continuing the whole story of Shenmue, where Shenfua discover her inhuman powers.
Resume: its just a casual social cheap free game for the whole world play and its going to be the most played game in the series without any doubt.
I'm not sure what to think right now. Not really angry with Sega...