Vastwood Hydra is on the field, 7/7 atm (7 x +1/+1 counters). My adversary blocks it for combined strength of 7, all creatures in combat die when the damage resolves. When Vastwood Hydra dies I get to distribute all it's +1/+1 counters among my creatures. I designate my Kioras follower (2/2) as a recipient of a counter. My opponent decides to shock it for 2 damage (instant). What I want to know is, what happens? What comes first, the counter or the shock? If the shock comes first and my 2/2 goes to graveyard, does the counter "fizzle" lacking a target, or do I still have a +1/+1 counter to distribute?
Your Vastwood Hydra comes first if your opponent waits for the ability to resolve.
You distribute the counters upon resolution of the ability. This means that your opponent must choose to Shock your followers, before the Hydra ability resolves. The Hydra's ability doesn't use the word "Target", so you need not declare which creatures get the counters until the resolution of the Hydra's ability. From the cards rulings.
The ability that triggers when Vastwood Hydra dies doesn’t target any of the creatures. You can choose to put counters on a creature with protection from green, for example.
You choose how the counters will be distributed when the ability resolves.
Essentially, your opponent must choose what creature to target with Shock while the "distribute Vastwood Hydra's" ability is on the stack. If you have multiple 2/2s, your opponent can only Shock one and you can distribute the counters on the other.