Racism is prejudice, discrimination, or fear levied against a person or group of people based on their race or ethnicity, or the belief that certain racial or ethnic groups have inherent biological, physical, or mental advantages over others. Racism is often interpreted as inherently interpersonal, but it can be (and at least in the U.S., very much is) embedded into the legal, political, and economic institutions of a country. The enslavement of Africans in the U.S. and the Jim Crow laws of the post-Reconstruction era are explicit examples of institutional racism.
Interpersonal racism is what most people think of when they talk about racism. It is sometimes accidental; it can be based on inherent biases that were developed and reinforced over time. However, interpersonal racism often involves the deliberate misinterpretation of statistics to perpetuate negative stereotypes and reinforce bigoted beliefs. A common example of misinterpreted statistics is insinuating that the higher rates of crime in some areas with a large percentage of ethnic minorities is due to an inherent penchant for crime instead of the lack of resources in these areas resulting in increased desperation and stress.