A stereotype is cultural bias created by attributing real or perceived qualities or behaviour to an entire, or assuming them to be true for every individual within that group. It can be directed at an ethnic, racial or national group, or based on gender, sexual orientation or appearance.
In modern language, we tend to think of stereotyping as negative bias against an ethnic minority. Stereotyping can be negative or positive. Positive stereotyping is destructive in its own way, as it a) can create false expectation of members of the group and b) fosters prejudice against non-members, as they are assumed to be lacking in the positive quality or qualities.
Enduring stereotypes always contain an element of truth, which is why they are so powerful and last for generations. The problem is that the grain of truth is mistaken for a whole truth, often without social or cultural context.
Prejudice may be based on stereotype, or on fear of the unknown, or prior experience transferred to all members of a group.