According to Nietzsche, an aristocratic caste is fundamental to the ennoblement of the human species. This caste must believe that there is an order of rank that differentiates great humans from the commoners, and that they, as being of the highest rank, are the meaning and end goal of their society. Society exists in order to create the few exceptional individuals that are its crowning glory, that justify any sacrifice or hardship endured by that society. Life is will to power, says Nietzsche, and will to power is exploitation. All organic processes rely on some form of exploitation of the weaker by the stronger, and it is folly to try to eliminate this exploitation altogether.
Section 260 is a concise and definitive account of Nietzsche's conception of master and slave morality. The contrast of "good" and "bad" was developed by the aristocratic "masters," and is analogous to the contrast of "noble" and "contemptible." The masters see themselves- -strong, healthy, and powerful--as "good," and look down upon the weak, poor, unhappy slaves as "bad." The slaves, on the other hand, come to see their oppressive masters as "evil," and develop the concept of "good" to describe themselves in contrast to these masters.
These are the two fundamental types of morality in the world, and all modern moralities are some kind of amalgamation of these two. For instance, our concept of vanity is a combination of the masters' inclination to think well of themselves and the slaves' sense that their worth is determined by the opinion of other people. Thus, vanity is an attempt to make others think highly of oneself so as to convince oneself of this good opinion.
Nietzsche makes explicit his Lamarckism in section 264. Our character is to a large extent determined by the characters of our ancestors as determined by their station in life. Thus, some people are naturally disposed to being of a more noble character.
By simple majority rule, the exceptional is always marginalized. Nietzsche points to the development of language as a means of expressing what people share in common and can understand of one another. Whatever is exceptional and uncommon is thus necessarily difficult to express in language and difficult for the majority to understand. The greater a thought is, the longer it takes for posterity to recognize it. Higher spirits are thus always misunderstood and made to suffer. In order to ward of unwanted pity, these higher spirits create masks that conceal this suffering from the public. The only thing worse than being misunderstood is being understood; that would mean someone else had been made to endure their suffering as well.
Nietzsche also remarks on the solitude of people who aspire to rise above the masses. To such people, all company is a means, a delay, or a resting-place: until their goal is reached, nothing else is of any importance. Reflecting on this fact, Nietzsche suggests that perhaps it is not genius, but the opportunity to take full advantage of genius, that is so rare. The noble man is not distinguished by works or deeds so much as by a degree of self-respect that commoners lack.