Data classification assigns sensitivity levels to data based on impact if disclosed — enabling appropriate protection proportionate to sensitivity.
Common levels: Public, Internal, Confidential, Restricted/Secret. Government: Unclassified, CUI, Confidential, Secret, Top Secret/SCI. Classification drives: encryption requirements, access controls, handling procedures, retention policies. Without classification, you treat all data the same (either over-protecting cheap data or under-protecting sensitive data).