An ethnic group is a group of human beings whose members identify with each other, through a common heritage that is real or presumed.  Ethnic identity is further marked by the recognition from others of a group's distinctiveness and the recognition of common cultural, linguistic, religious, behavioral or biological traits,  real or presumed, as indicators of contrast to other groups.
Ethnicity is an important means through which people can identify themselves. According to "Challenges of Measuring an Ethnic World: Science, politics, and reality", a conference organized by Statistics Canada and the United States Census Bureau (April 1-3, 1992), "Ethnicity is a fundamental factor in human life: it is a phenomenon inherent in human experience." However, many social scientists, like anthropologists Fredrik Barth and Eric Wolf, do not consider ethnic identity to be universal. They regard ethnicity as a product of specific kinds of inter-group interactions, rather than an essential quality inherent to human groups. Processes that result in the emergence of such identification are called ethnogenesis. Members of an ethnic group, on the whole, claim cultural continuities over time, although historians and cultural anthropologists have documented that many of the values, practices, and norms that imply continuity with the past are of relatively recent invention.
According to Thomas Hylland Eriksen, until recently the study of ethnicity was dominated by two distinct debates. One is between "primordialism" and "instrumentalism." In the primordialist view, the participant perceives ethnic ties collectively, as an externally given, even coercive, social bond. The instrumentalist approach, on the other hand, treats ethnicity primarily as an ad-hoc element of a political strategy, used as a resource for interest groups for achieving secondary goals such as, for instance, an increase in wealth, power or status.  This debate is still an important point of reference in Political science, although most scholars' approaches fall between the two poles.
The second debate is between "constructivism" and "essentialism." Constructivists view national and ethnic identities as the product of historical forces, often recent, even when they present themselves as old.  Essentialists view such identities as ontological categories defining social actors, and not themselves the result of social action. 
According to Eriksen, these debates have been superseded, especially in Anthropology, by scholars' attempts to respond to increasingly politicized forms of self-representation by members of different ethnic groups and nations in the context of debates over multiculturalism in countries like the United States and Canada, and post-colonialism in the Caribbean and South Asia.
The terms "ethnicity" and "ethnic group" are derived from the Greek word "ethnos" normally translated as "people" or "tribe". The term "ethnic" and related forms were used in English in the meaning of "pagan/ heathen" from the 14th century through the middle of the 19th century. This practice was derived from New Testament Greek, which used the plural ethne to render the Hebrew goyim.
The modern usage of "ethnic group", however, reflects the different kinds of encounters industrialized states have had with subordinate groups, such as immigrants and colonized subjects; "ethnic group" came to stand in opposition to "nation", to refer to people with distinct cultural identities who, through migration or conquest, had become subject to a foreign state. The modern usage of the word is relatively new - 1851 - with the first usage of the term ethnic group in 1935, and entering the Oxford English Dictionary in 1972. 
The modern usage definition of the Oxford English Dictionary is:
Writing about the usage of the term "ethnic" in the ordinary language of Britain and the United States, Wallman notes that
The term 'ethnic' popularly connotes 'race' in Britain, only less precisely, and with a lighter value load. In North America, by contrast, 'race' most commonly means colour, and 'ethnics' are the descendents of relatively recent immigrants from non-English-speaking countries. 'Ethnic' is not a noun in Britain. In effect there are no 'ethnics'; there are only 'ethnic relations'. Thus, in today's everyday language, the words "ethnic" and "ethnicity" still have a ring of exotic peoples, minority issues and race relations.
Within the social sciences, however, the usage has become more generalized to all human groups that explicitly regard themselves and are regarded by others as culturally distinctive. Among the first to bring the term "ethnic group" into social studies was the German sociologist Max Weber, who defined it as:
[T]hose human groups that entertain a subjective belief in their common descent because of similarities of physical type or of customs or both, or because of memories of colonization and migration; this belief must be important for group formation; furthermore it does not matter whether an objective blood relationship exists.
Harold Isaacs has identified other diacritics (distinguishing markers) of ethnicity, among them physical appearance, name, language, history, and religion; this definition has entered some dictionaries.
Weber maintained that ethnic groups were "künstlich" (artificial, i.e. a social construct) because they were based on a subjective belief in shared "Gemeinschaft" (community). Secondly, this belief in shared Gemeinschaft did not create the group; the group created the belief. Third, group formation resulted from the drive to monopolise power and status. This was contrary to the prevailing naturalist belief of the time, which held that socio-cultural and behavioral differences between peoples stemmed from inherited traits and tendencies derived from common descent, then called "race".
Another influential theoretician of ethnicity was Fredrik Barth, whose "Ethnic Groups and Boundaries" from 1969 has been described as instrumental in spreading the usage of the term in social studies in the 1980s and 1990s.  Barth went further than Weber in stressing the constructed nature of ethnicity. To Barth Ethnicity was perpetually negotiated and renegotiated by both external ascription and internal self-identification. Barth's view is that ethnic groups are not discontinuous cultural isolates, or logical a prioris to which people naturally belong. He wanted to part with anthropological notions of cultures as bounded entities, and ethnicity as primordialist bonds, replacing it with a focus on the interface between groups. Ethnic Groups and Boundaries, therefore, is a focus on the interconnectedness of ethnic identities. Barth writes: "[...] categorical ethnic distinctions do not depend on an absence of mobility, contact and information, but do entail social processes of exclusion and incorporation whereby discrete categories are maintained despite changing participation and membership in the course of individual life histories."
In 1978 anthropologist Ronald Cohen claimed that the identification of "ethnic groups" in the usage of social scientists often reflected inaccurate labels more than indigenous realities:
... the named ethnic identities we accept, often unthinkingly, as basic givens in the literature are often arbitrarily, or even worse inaccurately, imposed.In this way he pointed to the fact that identification as an ethnic group by outsiders, e.g. anthropologists, may not coincide with the self-identification of the members of that group. He also described that in the first decades of usage the term ethnicity had often been used in lieu of older terms such as "cultural" or "tribal" when referring to smaller groups with shared cultural systems and shared heritage, but that "ethnicity" had the added value of being able to describe the commonalities between systems of group identity in both tribal and modern societies.Cohen also suggested that claims concerning "ethnic" identity (like earlier claims concerning "tribal" identity) are often colonialist practices and effects of the relations between colonized peoples and nation-states.
Social scientists have thus focused on how, when, and why different markers of ethnic identity become salient. Thus, anthropologist Joan Vincent observed that ethnic boundaries often have a mercurial character. Ronald Cohen concluded that ethnicity is "a series of nesting dichotomizations of inclusiveness and exclusiveness". He agrees with Joan Vincent's observation that (in Cohen's paraphrase) "Ethnicity ... can be narrowed or broadened in boundary terms in relation to the specific needs of political mobilization. This may be why descent is sometimes a marker of ethnicity, and sometimes not: which diacritic of ethnicity is salient depends on whether people are scaling ethnic boundaries up or down, and whether they are scaling them up or down depends generally on the political situation.
In order to avoid the problems of defining ethnic classification as labelling of others or as self-identification it has been proposed to distinguish between concepts of "ethnic categories", "ethnic networks" and "ethnic communities" or "ethnies" 
Different approaches to understanding ethnicity have been used by different social scientists when trying to understand the nature of ethnicity as a factor in human life and society. Examples of such approaches are: primordialism, essentialism, perennialism, constructivism, modernism and instrumentalism.
Before Weber, race and ethnicity were often seen as two aspects of the same thing. Around 1900 and before the essentialist primordialist understanding of ethnicity was predominant, cultural differences between peoples were seen as being the result of genetically inherited traits and tendencies. This was the time when "sciences" like phrenology claimed to be able to correlate cultural and behavioral traits of different populations with their physical characteristics, such as the shape of the skull.
With Weber's introduction of ethnicity as a social construct, race and ethnicity were divided from each other, since the belief in biologically well-defined races lingered on. In 1950, the UNESCO statement, "The Race Question", signed by some of the internationally renowned scholars of the time (including Ashley Montagu, Claude Lévi-Strauss, Gunnar Myrdal, Julian Huxley, etc.), suggested that: "National, religious, geographic, linguistic and cultural groups do not necessarily coincide with racial groups: and the cultural traits of such groups have no demonstrated genetic connection with racial traits. Because serious errors of this kind are habitually committed when the term 'race' is used in popular parlance, it would be better when speaking of human races to drop the term 'race' altogether and speak of 'ethnic groups'."
In 1982, American cultural anthropologists, summing up forty years of ethnographic research, argued that racial and ethnic categories are symbolic markers for different ways that people from different parts of the world have been incorporated into a global economy:
The opposing interests that divide the working classes are further reinforced through appeals to "racial" and "ethnic" distinctions. Such appeals serve to allocate different categories of workers to rungs on the scale of labor markets, relegating stigmatized populations to the lower levels and insulating the higher echelons from competition from below. Capitalism did not create all the distinctions of ethnicity and race that function to set off categories of workers from one another. It is, nevertheless, the process of labor mobilization under capitalism that imparts to these distinctions their effective values.According to Wolf, races were constructed and incorporated during the period of European mercantile expansion, and ethnic groups during the period of capitalist expansion.
At present the prevailing understanding of race among social scientists is that it is, like ethnicity, a social construct.  Often, ethnicity also connotes shared cultural, linguistic, behavioural or religious traits. For example, to call oneself Jewish or Arab, one immediately invokes a clutch of linguistic, religious, cultural and racial features that are held to be common within each ethnic category. Such broad ethnic categories have also been termed macroethnicity to distinguish them from smaller more subjective ethnic features, often termed microethnicity. 
In some cases, especially involving transnational migration, or colonial expansion, ethnicity is linked to nationality. Anthropologists and historians, following the modernist understanding of ethnicity as proponed by Ernest Gellner and Benedict Anderson see nations and nationalism as developing with the rise of the modern state system in the seventeenth century, culminating in the rise of "nation-states" in which the presumptive boundaries of the nation coincided (or ideally coincided) with state boundaries.Thus, in the West, the notion of ethnicity, like race and nation, developed in the context of European colonial expansion, when mercantilism and capitalism were promoting global movements of populations at the same time that state boundaries were being more clearly and rigidly defined. In the nineteenth century, modern states generally sought legitimacy through their claim to represent "nations." Nation-states, however, invariably include populations that have been excluded from national life for one reason or another. Members of excluded groups, consequently, will either demand inclusion on the basis of equality, or seek autonomy, sometimes even to the extent of complete political separation in their own nation-state. Under these conditions—when people moved from one state to another, or one state conquered or colonized peoples beyond its national boundaries—ethnic groups were formed by people who identified with one nation, but lived in another state.
See also: Ethnic conflict. Sometimes ethnic groups are subject to prejudicial attitudes and actions by the state or its constituents. In the twentieth century, people began to argue that conflicts among ethnic groups or between members of an ethnic group and the state can and should be resolved in one of two ways. Some, like Jürgen Habermas and Bruce Barry, have argued that the legitimacy of modern states must be based on a notion of political rights of autonomous individual subjects. According to this view the state should not acknowledge ethnic, national or racial identity but rather instead enforce political and legal equality of all individuals. Others, like Charles Taylor and Will Kymlicka argue that the notion of the autonomous individual is itself a cultural construct. According to this view, states must recognize ethnic identity and develop processes through which the particular needs of ethnic groups can be accommodated within the boundaries of the nation-state.
The nineteenth century saw the development of the political ideology of ethnic nationalism, when the concept of race was tied to nationalism, first by German theorists including Johann Gottfried von Herder. Instances of societies focusing on ethnic ties arguably to the exclusion of history or historical context have resulted in the justification of nationalist goals. Two periods frequently cited as examples of this are the nineteenth century consolidation and expansion of the German Empire and the Third (Greater German) Reich, each promoted on the pan-ethnic idea that these governments were only acquiring lands that had always been ethnically German. The history of late-comers to the nation-state model, such as those arising in the Near East and south-eastern Europe out of the dissolution of the Ottoman and Austro-Hungarian Empires, as well as those arising out of the former USSR, is marked by inter-ethnic conflicts that usually occurs within multi-ethnic states, as opposed to between them, in other regions of the world; thus, those other conflicts are often misleadingly labelled and characterized as "civil war."
In the United States of America, collectives of related ethnic groups are typically denoted as "ethnic." Most prominently in the U.S., the various Latin American racial and ancestral groups are typically grouped as either "Hispanics" or "Latinos". The many previously designated 'Oriental' ethnic groups are designated as Asian ethnic groups and similarly linked together as "Asians." The terms "Black" and "African American," while different, usually describe people whose ancestors were indigenous to sub-Saharan Africa, and exclude descendants of European colonists in Africa.
The term White generally describes people whose ancestry can be traced to Europe (including other European-settled countries such as Argentina, Australia, and Canada, where people of European ethnic backgrounds form the bulk of the populations) who now live in the United States. "Middle Easterners" are peoples from the Middle East, i.e. Southwest Asia and North Africa. These countries include the Arab Nations, Turkey and Iran. (The U.S. Census Bureau compiled a list of ethnic groups which may be seen at Ethnicity (United States Census)).
In the United Kingdom, different classifications, both formal and informal, are used. Perhaps the most accepted is the National Statistics classification, identical to that used in the 2001 Census in England and Wales (see Ethnicity (United Kingdom)). In general popular use in the United Kingdom and Europe, the terms oriental and Asian are widespread and without negative connotation, with the latter term usually reserved in the United Kingdom for people from the Indian subcontinent (see British Oriental and British Asian for more details).
China officially recognizes 56 ethnic groups, the largest of which is the Han Chinese. Many of the ethnic minorities maintain their own culture and language, although many are also becoming more like the Han Chinese. Han Chinese predominate in most areas of China, with the exception of Tibet and Xinjiang, where the Han are still in the minority. The Han Chinese are the only ethnic group bound by the one-child policy. (For more details, see List of ethnic groups in China and Ethnic minorities in China.)
In France, no population census includes ethnic categories. In recognition of abuses when the French cooperated with deportation of Jews under the Nazi Occupation, the legislature passed laws preventing the government from collecting, maintaining or using ethnic population statistics. The French government, led by Nicolas Sarkozy and François Fillon, has begun a legislative process to repeal this prohibition.
In this regard, distinctions of "race" have implications rather different from "ethnic" variations. Racial distinctions, such as "Indian" or "Negro," are the outcome of the subjugation of populations in the course of European mercantile expansion. The term Indian stands for the conquered populations of the New World, in disregard of any cultural or physical differences among Native Americans. Negro similarly serves as a cover term for the culturally and physically variable African populations that furnished slaves, as well as for the slaves themselves. Indians are conquered people who could be forced to labor or pay tribute; Negroes are "hewers of wood and drawers of water", obtained in violence and put to work under coercion. These two terms thus single out for primary attention the historic fact that these populations were made to labor in servitude to support a new class of overlords. Simultaneously, the terms disregard cultural and physical differences within each large category, denying any constituent group political, economic, or ideological identity of its own.
Racial terms mirror the political process by which populations of whole continents were turned into providers of coerced surplus labor. Under capitalism these terms did not lose their association with civil-disability. They continue to invoke supposed descent from such subjugated populations so as to deny their putative descendants access to upper segments of the labor market. "Indians" and "Negroes" are thus confined to the lower ranks of the industrial army or depressed into the industrial reserve. The function of racial categories within capitalism is exclusionary. They stigmatize groups in order to exclude them from more highly paid jobs and from access to the information needed for their execution. They insulate the more advantaged workers against competition from below, making it difficult for employers to use stigmatized populations as cheaper substitutes or as strikebreakers. Finally, they weaken the ability of such groups to mobilize politically on their own behalf by forcing them back into casual employment and thereby intensifying competition among them for scarce and shifting resources.
While the categories of race serve primarily to exclude people from all but the lower echelons of the industrial army, ethnic categories express the ways that particular populations came to relate themselves to given segments of the labor market. Such categories emerge from two sources, one external to the group in question, the other internal. As each cohort entered the industrial process, outsiders were able to categorize it in terms of putative provenance and supposed affinity to particular segments of the labor market. At the same time, members of the cohort itself came to value membership in the group thus defined, as a qualification for establishing economic and political claims. Such ethnicities rarely coincided with the initial self-identification of the industrial recruits, who thought of themselves as Hanovarians or Bavarians rather than as Germans, as members of their village or their parish (okiloca) rather than as Poles, as Tonga or Yao rather than "Nyasalanders." The more comprehensive categories emerged only as particular cohorts of workers gained access to different segments of the labor market and began to treat their access as a resource to be defended both socially and politically. Such ethnicities are therefore not "primordial" social relationships. They are historical products of labor market segmentation under the capitalist mode.
Eric Wolf, 1982, Europe and the People Without History, Berkeley: University of California Press. 380-381