Learn Russian: В саду мы сидели в тени.

The word сад (garden) is one of those special masculine nouns that takes a stressed -у ending in the Prepositional case to indicate physical location. If we were talking about the garden, it would be о саде, but because we are physically in it, we use the special locative form в саду.

Is в тени also a special locative form like в саду?

Sort of! The noun тень (shade or shadow) is a feminine word ending in a soft sign, which means its regular Prepositional ending is already -и. However, it has a special locative stress shift. When talking about location, the stress falls on the ending (в тени́), whereas if you were talking about the shade, the stress stays on the root (о те́ни).

Why use the imperfective verb сидели instead of a perfective form?

Сидели (were sitting) describes a continuous state or an ongoing action in the past. In Russian, when you want to say you were in a physical position (like sitting, standing, or lying down) for any length of time, you almost always use the imperfective verb.

How should the preposition в be pronounced before саду and тени?