Hogwarts Houses.
Students at Hogwarts are divided into four houses, named after the four founders: Gryffindor, Ravenclaw, Hufflepuff and Slytherin. The students are selected following the criterias set by the founders themselves, more than a thousand years ago. The sorting of the students takes place in their first year, upon their arrival at the school. They enter the Great Hall and the sorting Hat is placed upon their head. This bewitched Hat - the same used sicne the school was first founded - can capture the students true nature and sort him into his or her rightful house.
As Professor McGonagall points out, whilst they are at school, their house is like their home. Their victories will bring them points and any rule-breaking will make them loose points. A strong bond connects the members of one house and there is a lot of rivalry between houses - especially between Gryffindor and Slytherin.

Even when not at school, students proudly display their loyalties by wearing they house scarf for instance. Harry himself has a Gryffindor flag up on the wall of his bedroom.

Gryffindor
You might belong in Gryffindor,
Where dwell the brave at heart,
Their daring, nerve, and chivalry
Founded by Godric Gryffindor, this house bears the colors of gold and red and its members are known to be brave and daring. They also hve quite a knack for breaking rules, although it's never out of pure malice - more out of curiosity and sometime heroism.
The House emblem is a lion, which suits the qualities looked upon in each of its members. The Gryffidor common room and dormitries are up in one of the school's towers and the entrance is guarded by the Fat Lady (a painting). Gryffidor Tower is decorated in red and gold. It's full of comfy chairs and is often redecorated by the kids with large Gryffidor banners - espcially after a victorious Quittch game. Gryffindors are known to be gifted in Tranfiguration & Defence Against the Dark Arts and their current Head of House is Professor McGonagall. The Gryffindor ghost is Sir Nicholas 'Neraly-Headless Nick'.
Known Gryffindors Harry Potter, the Weasleys, Hermione Granger, James Potter, Lily Evans, Albus Dumbledore.

Slytherin
Or perhaps in Slytherin
You'll make your real friends
Those cunning folk use any means
To achieve their ends.
Founded by Salazar Slytherin, this house bears the colors of green and silver. Slytherin students are cunning and deceitful, they will stop at nothing to achieve their goals. Most of the them are pure-bloods, although half-bloods are know to have been slytherins (Snape, Voldemort) but given their fate they seem to have been well sorted.
A snake is the house emblem, representing slytherins nature - and the fact that the fouder was a Parseltongue (could speak to snakes). The Slytherin dormitories are situated in a dungeon. Slytherins are generally attracted to Potion-making and Severus Snape is their Head of House. The Bloody Baron is Slytherins' ghost.
Known Slytherins Tom Riddle, Draco Malfoy, Lucuis Malfoy, Horace Slughorn.

Ravenclaw
Or yet in wise old Ravenclaw
If you've a ready mind
Where those of wit and learning
Will always find their kind.
Founded by Rowena Ravenclaw and bearing a eagle and the colors blue and bronze, Ravenclaw house selects the gifter and intelligent students. Professor Flitwick is the Ravenclaw Head of House.
Known Ravenclaws Luna Lovegood, Cho Chang.

Hufflepuff
These belong in Hufflepuff,
Where they are just and loyal.
Those patient Hufflepuffs are true
And unafraid of toil.
Founded by Helga Hufflepuff, who decided to accept all the students that the others would not, Hufflepuff House bears the colors of yellow and black and a badgem is its emblem. Hufflepuffs have a strong interest in Herbology and their Head of House is Professor Spout.
Known Hufflepuffs Susan Bones, Cedric Diggory, Ernie MacMillan.
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