Social identity theory basically states that people do not have one identity but rather a collection of identities they assume at different times depending on the people they are with and the situation in which they find themselves. The different identities help an individual associated with a given group and at the same time differentiate the group from everyone not associated with it. The most common example refers to the way people act differently with their friends than they do with their family.
Membership to a group frequently associated with a given level of prestige can boost the members' self-esteem. When with the group, there is a clear "us" and "them" attitude that can boost pride associated with membership to that group, but this attitude can also enhance in-group bias, which is commonly seen in fraternities, sororities and other elite groups. On a lesser scale, this is seen in the cliques formed in grade school that sometimes encourage isolating out-group members or bullying.
Psychologists often talk of the value of a social support system, especially when treating patients in psychotherapy. A social support system may include family or spouse, friends, coworkers or members of the community, such as a church or temple. In times of stress or struggle people call upon their social support system for encouragement and hope, help, advice or simply moral support. With regard to social identity theory, members of in in-group may find an increase emotional strength and coping skills associated with their group membership.
Parents try to teach children not to hang out with bad kids, and social identity theory supports the contention that our behaviours are influenced by those with whom we associate. For example, if surrounded by people who consistently slack off or ignore responsibilities, our behaviours may begin to mirror the behaviours of our group, thus encouraging our acceptance by other group members. Conversely, if surrounded by people who consistently demand more of themselves, we are likely to do the same so as to avoid being seen in a negative light by our peers.
Social identity theory does not require solid or official membership in order to benefit people. For example, when travelling overseas, if you meet someone from your country or place of birth, most people feel a connection or bond with a stranger simply because both have an association with a particular group while surrounded by people who are not members of that group. Additionally, this is similar to when someone moves to a new city and makes friends with people who share common interests -- for example, in book clubs, school activities, hobbies or foreign language study.