The premise of the social identity concept is that individuals partially derive their self-concepts from membership in social groups.
George Mead introduced the social basis for self-definition around 1934, thus setting a base for the development of social identity theory. Henri Tajfel and John Turner developed this idea further through their 1979 experiment. In that experiment, they found that humans are likely to form a group identity and discriminate in favor of their groups, even though the researchers formed the groups arbitrarily and with no clear commonality present.
Social identity theory posits that social identification is borne out of biased in-group comparisons. These social group comparisons reinforce social identity and enhance group members in social, psychological and even economic ways. This was another finding of Tajfel and Turner’s 1979 experiment.
The formation of social identity occurs in three basic phases. The first is social categorization, followed by social identification and social comparison. Social categorization involves our understanding of the groups that exist. These include racial classification and membership in social groups.
With social identification, we use categories to classify ourselves in relation to others, either by incorporation (membership in groups) or by individual characteristics (such as race). For example, if someone classifies himself as a member United States Army, he identifies with the United States, the military and, specifically, the army.
In the final stage of social comparison, one compares the groups standing to that of other groups. For example, the U.S. army soldier might compare his group (usually favorably) to the U.S. Army to the U.S. Marines or to the British Army. Even within the army group, there are significant subgroups (Commissioned and Non-Commission Officers).
Tajfel and Turner also made the important assumption that persons generally prefer positive affiliations to negative ones (referred to as positive distinctiveness). This explains why group identification is higher when a group achieves dominance or success (for example, when your favorite sports team wins).
A person’s self-concept is rather dynamic and varied. For instance, a person can be a father, spouse or lodge member all at once. However, the social context determines which groups one identifies with at a particular point in time. Individuals therefore have multiple social identities and self-consciousness at different levels (individual, familial and national levels).
Ultimately, the social identity concept provides a robust framework for psychologists to understand issues of labeling, self-esteem, discrimination and conformity.
Helpful links about social identity:
http://www.cw.utwente.nl/theorieenoverzicht/Theory%20clusters/Interpersonal%20Communication%20and %20Relations/Social_Identity_Theory.doc/
http://www.simplypsychology.pwp.blueyonder.co.uk/social-identity-theory.html