During the course of the game, the player has the opportunity to purchase 21 different planes, from models that actually exist to prototypes or relatively new aircraft that were in development (at the time of game production) and their weaponry. Every plane has two alternate paint schemes, gained by achieving a superior, or S, ranking on a stage in normal difficulty mode, by shooting down the ace pilots on each stage, or by completing the challenge modes.
The difficulty mode determines the number of enemies per stage, their AI skill and damage threshold, and how much damage the player's aircraft can sustain in total. On the hardest difficulty level, a single enemy missile can down the player's aircraft, whereas on the easiest level it would take several missile hits.
The player must purchase all aircraft and extra weapons they want to use, but only once. Identical weapons for different types of planes cannot be used interchangeably. Players gain money by destroying enemies, or selling aircraft/weapons between missions. Only the default aircraft, the F-4E Phantom, cannot be sold. It is sometimes advantageous to buy/sell different combinations of planes & weapons depending on the mission requirements outlined in the briefing, as some planes are more suitable than others for certain missions. Once all of the mission objectives are complete, the player is awarded bonus money for performing above and beyond the requirements of the mission objectives (neutralizing extra targets and assorted enemy fighters, etc.). In order to purchase all planes and weapons available in the game, the game must be completed several times.
Ace Combat 04: Shattered Skies introduced two new additions: radio chatter and anime-style cutscenes in which a man (who is the grown-up version of the little boy in the cutscenes) reads a letter (addressed to the player) of his memories of the Continental War, played over still images.
The game is set in the fictional world of Strangereal in the Ace Combat Universe, spanning from 2004-2005, taking place on the continent of Usea. The game's backstory indicates that prior to the events of the game, the world was threatened by a massive asteroid, codenamed Ulysses 1994XF04, which was on a collision course with the planet. The nations of the world began to devise several solutions to counteract the collision itself. The nations of the Usean Continent decided to erect an array of anti-asteroid rail-guns codenamed "Stonehenge" in order to destroy Ulysses in the atmosphere. In 1999, Ulysses breached the planet's atmosphere and splintered off into numerous fragments, which rained down upon the surface. Stonehenge destroyed a substantial number of asteroid fragments, but the damage wrought upon the surface of the planet was catastrophic, as numerous cities were leveled and thousands were killed. In Usea, the devastated nations agreed to take in refugees and begin the long process of rebuilding. However, Erusea, a belligerent nation on the continent's west coast, was shattered economically by the disaster and sought to seize control of Usea; it began a military buildup. Erusian forces captured Stonehenge and repurposed the weapon as an anti-aircraft installation capable of striking at targets across the continent. The other nations of Usea, unwilling to tolerate such recalcitrance by the Erusians, band together into a military defense coalition known as the Independent States Allied Forces (ISAF). Erusea initiates an expansionist movement eastward, and routs the ISAF military, occupying key strategic locations across the continent with the assistance of the Stonehenge weapon, which decimates ISAF air power. With ISAF on the verge of what appears to be imminent defeat, the ISAF General Headquarters (GHQ) is relocated to the island of North Point off the Northeastern coast of Usea, while surviving pockets of ISAF forces are pushed back to the East Coast of the continent in small enclaves with their backs to the sea.
The player takes on the role of Mobius 1, an elite fighter pilot serving in the ISAF air arm. The game's events itself begin following the retreat of ISAF GHQ toward North Point. Mobius 1 and his squadron are dispatched to thwart Erusian attempts to invade North Point, intercepting and destroying a unit of Erusian bombers off the coast, while catching another bomber unit on the ground at the nearby Rigley Airbase. Mobius 1 also takes part in the destruction of an Erusian radar installation at Mt. Shezna, enabling surviving ISAF military units to retreat back to North Point without being spotted by Erusian reconnaissance. The ISAF Air Force subsequently destroys the Erusian "Invincible" Aegir Fleet moored at Comberth Harbor, thwarting the Erusians' attempts to invade North Point by sea. Bolstered by their stunning victories with the assistance of Mobius 1, who has already garnered a reputation for himself amongst the Allied and Erusian forces, ISAF initiates an airstrike to target Erusian solar panel facilities in the heart of the continent. However, Stonehenge inflicts heavy casualties upon the strike force, reminding ISAF that the weapon still has an iron grip over the skies of the continent.
Between missions, a story is told through twelve interlude flashbacks, later revealed to be a long letter to Mobius 1 about the war and living inside the occupation. The letter is written by an unnamed man, whose parents were killed when an ISAF fighter jet crashed into their house in San Salvacion when he was a child. This fighter jet was shot down by Yellow 13, the Erusians' top fighter pilot, and a member of the well-known elite Aquila "Yellow" Squadron. Following his parents' death the boy is taken in by his uncle, a taxi driver who lives in the city above a tavern frequented by Erusian soldiers. While in the tavern, the boy befriends Yellow 13 after meeting him and the other Yellow Squadron members. He also learns that the owner of the bar is a member of the local resistance against Erusea and becomes a "spy" for them due to his friendship with Yellow 13.
As the war progresses, Mobius 1's contributions begin to turn the tide as the Allies begin retaking Usea. Mobius 1 and the ISAF Air Force partake in Operation: Bunker Shot, an amphibious invasion of the Southern coast of Usea which establishes a foothold on the continent. The situation in the city of San Salvacion becomes more desperate as the ISAF forces advance closer. The boy recalls one event where the bar owner's daughter plants a bomb on the airfield, which severely damages Yellow 4's plane and greatly angers Yellow 13, since Yellow 4 is his closest companion. ISAF then attacks Stonehenge itself and Mobius 1 manages to destroy it. Yellow Squadron arrives too late to affect the battle, but nonetheless engage Mobius 1 only to have Yellow 4 shot down and killed. Yellow 13 is also eventually shot down along with the rest of Yellow Squadron by Mobius 1 in the skies above the Erusian capital, Farbanti. Following the capture of Farbanti, as well as the general surrender of all Erusian military forces, a group of young rogue Erusian officers activate another superweapon, Megalith, a missile launch facility capable of shooting down the asteroids from orbit to crash them into any location on the planet. Mobius 1 is given his own squadron of the best ISAF pilots available. Assaulting Megalith, the squadron is able to shoot down the Erusian defense squadron and destroy Megalith, putting a final end to the war.
The storyline is continued in the arcade mode of Ace Combat 5: The Unsung War, where it is revealed that a resistance movement called "Free Erusea" has continued to struggle against ISAF and the new ISAF-backed Erusian government since the war's end. Mobius 1, engaging the resistance forces, is able to cut off their supply lines and destroys the Free Erusian main headquarters, ending the uprising.
Some of the interlude flashbacks in the international release are slightly edited, due to different ratings systems. These differences can be seen in the original Japanese version:In Interlude #04, an image of a knife and a pistol are shown, with the narrator saying "I got a knife with the intent of using it against Yellow 13. I even lifted a pistol off a drunken enemy soldier." In the US version, this frame and monologue is removed entirely.
In Interlude #05, when the boy discovers the barkeep's secret upstairs room, the daughter is shown wielding a shotgun behind the door. In the international version, she is shown holding nothing.
In Interlude #09, when the boy confronts Yellow 13, he uses the pistol he stole previously to threaten him. In the US version, he is simply standing defiantly with his hands at his side.
Ace Combat 04: Shattered Skies was critically acclaimed, with IGN giving the game 9.1 out of 10 and Famitsu magazine scoring a rating of 33 out of 40 on release.