What do you do when he acts frightened? The more reinforcement he gets, the stronger the behavior will be. I have several very timid dogs, some who where untouchable when I first got them. I have found it highly effective to completely ignore the behavior. They act scared; I act as I normally would.

I like Patricia McConnell's approach. Her booklet, The Cautious Canine, is full of great info for helping timid dogs. (available on dogwise.com)

If he's still a puppy, socializing him will be much easier. If he's an adult, be prepared for slow progress, but it can be done. One of the most timid dogs I've ever owned now likes to sleep snuggled up to.