Medieval Social Classes and Stratification

Social classes are built on three basic values: Wealth, Status, and Power. These may be defined as:
Wealth: Whatever society physically values. This obviously includes money but may also include houses, cars, clothing, jewelry, and even things like acres of crops and livestock. (Economy)
Status: Whatever society culturally values. This includes education, training, family lineage, and social networks, but may also include such things as physical appearance and attitude. (Culture)
Power: However influence may be exerted in society. Military might, legal and legislative power, religious authority, even peer pressure and ostracism. (Politics)
In general, those in the highest classes have all three while those in the lowest classes have none of them but this is not always true. Chinese bureaucrats in the middle ages were highly educated and ran the legal system of the empire (making them powerful) but were not particularly rich. Chinese merchants had plenty of money but did not necessarily have a high status or power (which, of course, led to frequent corruption as the wealthy merchants and powerful bureaucrats traded money for favors and vice versa).

Medieval Europe
In Medieval Europe, wealth was primarily land-based. Most titles came with land and it was the revenue that could be derived from the land that the nobles used to support themselves. Initially, titles were military in nature and were (mostly) non-hereditary. They were assigned by the king or Lord as he wished and the wealth and status went with them. Alongside the military hierarchy was the church hierarchy which also bestowed land to support parishes and bishoprics.
Over time, most titles came to be hereditary so the importance of family lineage grew (though church titles stayed non-hereditary). Because of the military nature of the title, a noble's first responsibility was to equip and maintain troops to defend his territory and support his liege (Bishops were also expected to maintain a very small military force and a bishop fighting a war with a noble was not unheard of). After that came expenditures for clothing, jewelry, etc. to display his status. The earliest noble hierarchies had Roman origins and generally went King, Duke, Earl/Count, Baron, and Knight. Numerous other ranks were later added (ArchDuke - between a King and a Duke, Marquess - between a Duke and a Count, Viscount - an "assistant" count, etc.). The title "Prince" had a great deal of variety as to how it was applied and could be a title in and of itself (ranking above a Duke), the son of a king, or even an adjective used to describe a high ranking personage.
The middle class was made up of freemen who did not owe an obligation of service to someone else and who (usually) owned some small bit of property (a small piece of land, blacksmith tools, trade goods, etc.) Merchants and tradesmen made up the bulk of this class but high-ranking servants to the nobles might fall into this class since they were usually paid a stipend of some sort for their services. Due to the dangers of traveling long distances in the Early Middle Ages (500 A.D. to 1000 A.D.) trade was limited so merchants and tradesmen were usually locals and the middle class was small.
Below the freemen/middle class were various levels of peasants and serfs. These represented the large majority of the population in Europe (slaves existed but were uncommon). There are a variety of different definitions for these classes depending upon the location and date with different levels of rights and legal obligations. As a rule, a peasant may be thought of as a "co-owner" of the land they worked. The land technically belonged to the noble but the peasant could not be displaced at will and he had certain rights in how he used the land and met his labor obligations to the lord. Any additional profits he made from the land or his labor were his to keep. Serfs were generally tied to the land and went with the land if it was sold to someone else (in a sense, they belonged to the land). Their labor also generally belonged to the lord so any profit they made from their labor belonged to the Lord. In many ways, a serf was similar to a slave though they did have some legal protections that a slave did not (they could not be punished without cause, the landowner was responsible for feeding them in times of famine, etc.). At the very bottom of the social order were the slaves. Slaves were relatively rare in medieval Europe and they had no rights. As a general rule, Christian slaves could not be killed or mutilated without cause (which gave non-Christian slaves an incentive to convert).
The High Middle Ages (1000 A.D. to 1300 A.D) saw a rising middle class as both the Vikings (Norsemen) and Hungarians converted to Christianity, ceased their raids, and joined the European community. This made traveling long distances much safer and trade routes more profitable. The rise of merchant guilds (sharing risks and rewards across a group of investors) also helped to spark the rise of merchants. More trade goods helped to increase the number of tradesmen (the blacksmiths, bakers, etc who used these goods to produce finished products) while trade guilds also helped them to make more money. Serfs/peasants probably still made up the single largest class but they no longer represented the majority as both the merchant and tradesmen groups increased in size. Social mobility also increased as serfs who could escape their masters and live in a town for a year and a day without getting caught became free citizens of the town. Rich merchants and tradesmen could see their children marry into the lesser nobility or even buy a knighthood for themselves if they were wealthy enough.
The Late Middle Ages (1300 A.D. to 1500 A.D.) saw many declines in Europe but social mobility between classes exploded. The Black Death moved through different parts of Europe in the mid-1300s, killing somewhere between 1/3 and 1/2 of the population. Labor became very scarce and very valuable, especially skilled labor. Large areas of land fell into disuse because there weren't enough laborers to work them. Nobles were forced to concede more rights to the peasants and even to sell off land to a growing class of free farmers, while tradesmen were able to demand more for their services.