This is a pivotal moment in the film, as well as in the book and real life story that the film was based upon. As eNotes reminds us in the summary of the book Freedom Writers Diary, "the paper revealed a racist caricature full of hate. Gruwell told her class that it was this sort of hate and misunderstanding that led to the Holocaust." The Erin Gruwell Education Project calls the finding of the drawing "a pivotal moment that would change [the students'] lives forever."
The students, who have never heard of the Holocaust, are nevertheless intimately similar to Holocaust survivors: they have experienced intense violence, feel trapped and helpless, and are often victims of racially motivated generalizations or even crimes. By recognizing that the drawing has exaggerated characteristics that are considered typical of a certain race (for instance, a wider nose in the African American caricature), Erin spotted an instance of racially motivated hatred in her classroom. By connecting it to the Holocaust through the study of The Diary of Anne Frank, she gave her students two crucial things. (1) She offered them a way to connect personally to literature through their experience. (2) She provided a grim comparison to the students' hateful behavior that made it clear that such actions were not funny, tolerable, nor justifiable in her class. By demanding justice and racial tolerance in her classroom, she won her students' respect.