I am completely lost as to where this idea that as time goes forward matter is shrinking? Is this something new like the string theory that our thoughts have defined reality?
Anyways, Redshift isn't just the fact that the farther the object is the redder it is, you have to have a base for the shift. Some one looks at a star in the sky at dd/mm/yy. they measure all the fun aspects of it and wait until xx/mm/yy+1 and measure every thing again. They can then compare the light spectrum from the star and see that the wavelength of the light emitted is getting longer, i.e. shifting to the red end of the spectrum. From this they can calculate how far the star is from us and more importantly how fast it is moving away from the earth.
The Earth is the center of the universe idea most likely came from the fact that every star in the sky is moving away from the earth at relatively the same rate. for all stars and galaxies that are say, 1 million light years from Earth, they are moving at the same rate, but they're also moving away from us faster than stars that are 100,000 light years away. This is like this for any and every point in space we have measured so far.
What's even stranger though, is that they have calculated that this phenomenon is true for any object in space. Everything is moving away from each other at a faster rate the farther away it is from an object.
http://en.wikipedia.org/wiki/Metric_expansion_of_space
The universe itself has no center and has no edge. After Einstein started to put together the theories of gravity space and time, people far more brilliant than you and I have since learned that space and time are the same, which is why you see space-time said and used instead of just space.
This is also why the universe is infinite, because time is infinite.
As others have said, the metric expansion of space-time doesn't effect local groups (even local super-clusters which contain dozens or hundreds of galaxies) because of gravity. What we believe is pulling the universe apart, dark matter or energy, is still bound within the effects of gravity and gravity IS the strongest known force in the universe.
This video also answers the question as to why space-time is expanding and infininate.
http://www.youtube.com/watch?v=gxJ4M7tyLRE