Classified information is sensitive information to which access is restricted by law or regulation to particular classes of people. A formal security clearance is required to handle classified documents or access classified data. The clearance process requires a satisfactory background investigation. There are usually several levels of sensitivity, with differing clearance requirements. This sort of hierarchical system of sharing information among a group of people is used by most national governments. Deciding the level of sensitivity of data is called data classification.
The purpose of classification is to protect information from being used to damage or cause danger to national security. Classification says what is a "state secret" and deals with different levels of protection based on the damage the information might cause if it reached the wrong hands.
Some non-government organizations and corporations also have their own secret information, normally referred to as trade secrets.
Although the classification systems vary from country to country, most have levels like the following British definitions (from the highest level to lowest):
Depending on the level of classification there are different rules controlling the level of clearance needed to view the information, and how it must be stored, transmitted, and destroyed. Access is restricted on a "need to know" basis. Simply possessing a clearance does not automatically authorize the individual to view all material classified at that level or below that level. The individual must have a "need to know" in addition to the proper level of clearance.