According to simplepsychology.org, 'social identity is a person's sense of who they are based on their group membership(s).'

Henri Tajfel and John Turner proposed the social identity theory in 1979. He proposed that the groups - for example social class, family, sports teams - that people belonged to were an important source of pride and self - esteem. Groups give us a sense of belonging to the world and social identity. There are in - groups (us) the people with whom one shares a common identity and out - groups (them), those perceived as different or apart from one's in - group. There are three mental processes in which we evaluate other as 'us' and 'them'. These take place in the following particular order:

1) Categorisation: we categorise them and identify them - we do this to understand the social environment.

2) Social Identification: we adopt the identity of the group we have categorised ourselves as belonging to.

3) Social Comparison: once we're categorised we tend to compare ourselves with other groups.

A perfect example of in - groups and out - groups would be Mods and Rockers who were particularly popular groups in the 1960s/1970s. Mods wore parkas with a fur trim and suits, they wore generally more clean cut outfits and were well groomed in comparison to rockers. The music genre Mods were into was British Band Blues, Soul and RnB. They were very much centred on fashion and music and also loved Vespa scooters. 

Rockers were more interested in motorcycling and were influenced by Rock n Roll as that's what they listened to. They rocked black leather jackets with studs and patches and completed their outfits with creepers and motorcycle boots.

These two groups were known for their conflict throughout their period and still are today. Both groups went through the three mental stages in which they categorised, identified and compared themselves.