What makes a nation differs from country to country. In some countries, it is ethnicity that makes a nation. You can see this in countries like Japan where the nationality and the ethnicity go so closely together. In other countries, like the United States, the nation is made by allegiance to the same set of values and ideals.
Nationalism often comes to exist in times of crisis, I believe. When a nation feels threatened, it often comes together and picks some group of "others" to have as a common enemy that brings the nation closer together. I think individual identity occurs more in good times and in countries with open political cultures.
In common language nation means a large group of people united by a common language, ancestry, history, or culture. Nationalism is the feelings people have of loyalty to their nation and pride in their national characteristics. However in international politics and law nation means a group of people exercising self-government within a defined territory with the recognition of other nations. A nation may also be called a country or state.
Very closely related to the concept of nation is the concept of a state. A nation is a group of people who share a common feeling of national unity. A state is an area of land whose people have an independent government. The rise of nationalism occurred along with the development of a political unit in which a nation and a state have the same boundaries.
Nationalism gives people a sense of belonging and pride, and a willingness to strive to improve the condition and prestige of their nation. This contributes to improvement of the nation. At the same time nationalism may also have negative impact. It tends to produce rivalry and tension between nations.