Classification means dividing people into "us" versus "them."
After Germany lost World War I, they had to sign the Treaty of Versailles, which imposed harsh economic and territorial reparations on Germany. In an effort to pay the billions in reparations owed to the Allies, Germany's government (the Weimar Republic) printed more paper money, which led to hyperinflation.
The resulting high unemployment and poverty further hurt German citizens. Germans were angry and humiliated, and they wanted to find a scapegoat. A scapegoat is an innocent person or group who is blamed for the wrongdoings, mistakes, or faults of others. Jewish people were scapegoated for Germany's post-WWI problems. False rumors spread that German Jews secretly helped the Allies in WWI, leading to Germany's loss.
Adolf Hitler took advantage of these preexisting antisemitic (meaning anti-Jewish) feelings to gain popularity for his Nazi Party. Hitler claimed that German people were a superior race called Aryans. He said the Aryan race was pure and perfect, and that Jews were an inferior race that posed a threat the Germany.
This made Germans feel a sense of nationalism in this Aryan racial identity. The Aryan Race was favored and the Jews became the outsiders, blamed for all of Germany's problems.
A German propaganda postcard depicting a German soldier in WWI being stabbed in the back by a Jewish person.