Data Classification is about categorizing data into buckets to make it easier to retrieve, restrict access to, and protect. Data classification is important for businesses protect data according to its criticality or sensitivity. For example, companies need to protect HIPAA data differently that marketing campaigns. Consequently, they should be placed into separate protective containers (folder, network segments, or applications) rather than co-mingled with company's main file server user directories. By labeling and protecting information according to its categorizations, it helps employees access materials faster and helps ensure only authorized users may access protected data. These categories should be used in concert with principle of Least Privilege to further protect your data.
Source: Varonis, TechTarget, Netwrix
Additional Reading: Google Releases SimCLR AI Framework That Can Classify Images With Limited Labeled Data
Related Terms: Confidentiality, Least Privilege, Sensitive Information