(1) What differentiates the act of grouping people from the act of stereotyping?
(2)How can stereotyping effect group relations?
Stereotypes assume that all members of the group have all of the defining traits rather than a plurality or majority have those characteristics. People who hold stereotypes are less likely to view outgroup members ("them") as individuals and are more likely to be prejudiced against them.
Here are some articles on prejudice that might be helpful:
http://www.members.cox.net/dagershaw/lol/Prejudice.html
http://www.members.cox.net/dagershaw/lol/PrejudiceCauseSolution.html
http://www.members.cox.net/dagershaw/lol/PrejudiceChanges.html
http://www.members.cox.net/dagershaw/lol/PrejudiceReduce.html
I hope this helps. Thanks for asking.