Human beings have a strong need to categorize everything; this is not a fault but rather an asset. Without our ability to take isolated instances, gather them together in groups, and then make generalizations, we wouldn't have math, language, or even the ability for coherent thought. Without an ability to generalize from the specific to the abstract, you wouldn't be able to read and understand this right now. Nevertheless, as much of vital asset as it is, it can still be taken too far.
One of the ways in which this can occur is when we limit our categories too much. Naturally our categories cannot be infinite - we cannot, for example, place every object and every concept into its own unique category, unrelated to everything else. At the same time, we also cannot try to place absolutely everything into one or two completely undifferentiated categories.
When this latter situation occurs, it is commonly referred to as Black and White Thinking - so called because of the tendency of the two categories to be black and white, good and evil, right and wrong. Technically this can be considered a type of False Dichotomy, an informal fallacy which occurs when we are given only two choices in an argument and required to pick one, when in reality there are multiple options which have not been given due consideration.
When we fall victim to Black and White Thinking, we have mistakenly reduced an entire spectrum of possibilities down to the two most extreme options, each the polar opposite of the other without any shades of grey in between. Often, those categories are of our own creation, and we are attempting to force the world to conform to our preconceptions about what it should look like.
As an all-too-common example, many people insist that whoever is not "with" us must therefore be "against" us - and can then justifiably be treated as an enemy. This dichotomy assumes that there are only two possible categories - with us and against us - and that everything and everyone must belong to either the former or the latter. Possible shades of grey, like agreeing with our principles but not our methods, are ignored entirely.
Of course, we should not make the analogous mistake of assuming that such dichotomies are never valid. Simple propositions can often be categorized as true or false. For example, people can be divided into those who are capable of performing a task and those who currently cannot do so. Although many similar situations can be found, they are not usually the subject of debate, and hence not the subject of this analysis.
Where Black and White Thinking is a live issue and a genuine problem is in debates on topics like politics, religion, philosophy, and ethics. In debates such as these, Black and White Thinking is like an infection, reducing the terms of discussion unnecessarily, eliminating an entire range of possible ideas and often demonizing others by implicitly categorizing them in the "Black" - the evil that we are supposed to avoid.
The basic attitude which lies behind Black and White Thinking can often play a role with other issues as well, particularly in how we evaluate the state of our lives. People who suffer from depression, even in mild forms, commonly view the world in black and white, categorizing experiences and events in extreme terminology that fits with their generally negative perspective on life.
This is not to say that everyone who engages in Black and White Thinking is depressed or suffering from a mental problem. Instead, the point is simply to note that there is a common pattern to such thinking, whether it occurs in the context of depression or in the context of flawed arguments. The problem involves the attitude one takes with respect of the world around us, insisting that it conform to our preconceptions rather than adjusting our thinking to accept the world as it is.