The second seeded Russian cannot meet the tournament favourite until the final, but the 79-minute slaughter filled with blood-curdling shrieks is sure to provide food for thought for the 15-times grand slam champion.
With her two prior opponents left scoreless and humbled, Sharapova appeared set for a third successive 'double bagel' when she scorched to a 4-0 lead.
Mercifully, for herself and a stunned centre court crowd, 25th-seed Williams held serve to stave off another humiliation.
"I was a really determined player out there because I knew the tennis that she's capable of producing and playing," Sharapova told reporters of the seven-times grand slam champion.
"Despite what she's ranked or seeded, it doesn't matter when you go out on the court. She's been there. She's experienced enough to know no matter if you're playing the third round, the quarters, or the final, you have to be ready.
"I certainly was."
A much-hyped match-up was reduced to a one-sided rout, as Sharapova burned to a 5-1 lead in the second set.
Williams sparked raucous cheers by breaking Sharapova's serve and lifted the roof by holding her own to claw back to 5-3.
But Sharapova blasted an ace to seal the match, celebrating the victory with a fist-pumping scream.
The crushing loss amplified Williams's fall from her halcyon days, and left her stony-faced at her post-match media conference.
"Definitely not my best day today," said Williams, who has battled Sjogren's Syndrome, which causes fatigue and joint pain.
Belgium's Kirsten Flipkens, who has had compatriot and retired four-times grand slam champion Kim Clijsters helping her behind the scenes, is next to be thrown to the wolves against Sharapova.
Ana Ivanovic beat fellow Serb and once fierce rival Jelena Jankovic 7-5 6-3 in a battle of former world number ones to reach the fourth round of the Australian Open.
Three years ago or so, a clash between the two would have been in deep into the latter stages of a Grand Slam, rather than a third-round meeting.
Former French Open champion Ivanovic is seeded 13th this year and Jankovic at 22 but despite their fall from the top of the women's game, their rivalry remains intense.
"It's competitiveness," said Ivanovic, who will next face fourth seed Agnieszka Radwanska after the Pole took her winning streak to 12 matches by thrashing Britain's Heather Watson.
"You have that with everyone you play - and especially someone coming from your country. We were (once) both looking for the number one position and to win a Grand Slam.
"Of course there is going to be rivalry, but I think there is healthy rivalry too because you kind of push each other.
"We played in the 2008 French Open (semi-finals) and then here we were both in the semi-finals in 2008, so it definitely brings a lot of memories.
"We haven't played each other in a Grand Slam for a while, but it's always tough.
"She's still a very good player and even though we are different opponents now than we were then, still it's a battle, and every match you want to win."
Ivanovic trails Radwanska 4-3 in their previous meetings, losing the last four but insisted she was playing well enough to win and knows what she needs to do to topple the fourth seed.
"Being patient is going to be a key," she said. "It's going to be tough, for sure. I have to be prepared to work hard for my points and to keep on putting pressure on her.
"She definitely matured a lot as a player. She was always a very tough competitor. She has a style of game that she doesn't give you much and you really have to work for your points."
Ivanovic has lost some weight in recent months and says she is still trying to strike the right balance between fleetness of foot and power.
"It's just about the muscle and just getting the right balance because still you need to feel light on the court but you have to be powerful," she said.
"I had a really tough match the other day and today I came out and I was feeling fine and was explosive - so I'm very, very pleased that it's paying off. But I'm still working at it."
Fifth seed Angelique Kerber eased into the fourth round with a 6-2 7-5 over promising youngster Madison Keys.
Keys, one of the bright young talents of American tennis hoping to take the mantle from the Williams sisters, struggled with nerves during her centre court debut at Melbourne Park and lost 6-2 7-5 to the German.
Kerber will now play number 19 seed Ekaterina Makarova, after the Russian stunned 11th seeded Frenchwoman Marion Bartoli 6-7(4) 6-3 6-4.
China's Li Na was another high seed to progress on day five of action at Melbourne Park, the sixth seed brushing off Sorana Cirstea of Romania 6-4 6-1.
The 2011 French Open champion, who reached the final at Melbourne Park in the same year, next plays Germany's 18th seed Julia Goerges, who beat Li's compatriot Zheng Jie 6-3 1-6 7-5.
World number two Maria Sharapova would then be the odds-on semi-final opponent, and a major test, but ranking and reputation hold little fear for Li.
"I always try to play my game on the court ... but sometimes I was fighting against myself," the Chinese said.
"I always waste a lot of energy on the court. Right now the first step I have to follow (is) I don't have to (fight) against myself. So this is big step for me."