The hadith was qualified as hassan or sahih by a majority of great hadith scholars like ibn Hajar, al-'Iraqi, ibn Taymiyyah, a-Dhahabi while others considered it as da'if like as-Sakhawi and az-Zarkashi, the issue is the narrator Abdurrhaman ibn Thabet عَبْدِ الرَّحْمَنِ ابن ثَابت بن ثَوْبَانِ which authority is discussed, but as there's an other narration on the authority of al-Awzaa'i one should take it as a rather good hadith especially as it was also narrated on the authority of other sahaba () and tabi'yn in less common hadith compilations (see here in Arabic)!
The meaning of imitation here in first place applies to acts and behavior not to a race. The Quran gives us many evidences on this issue warning us from blindly following non-Muslims: read for example (2:109), (3:105) and (45:18-20).
So scholars say if you imitate good people you are "counted" among them and also if you imitate bad people you're "counted" among them.
Imitation can be in the way of life, clothes, style of walking, speaking etc. ...
According to this fatwa on islamqa (A Chinese translation is available ^_*).
There are two kinds of imitation of non-Muslims:
A prohibited kind: which in first place includes to imitate their religious and rituals as far as they don't go along with the teachings of Islam (see also this sahih hadith). This imitation is considered a major sin if not a sign of kufr (disbelief), but this applies for those who are fully aware that they are doing haram things in first place!
An allowed kind: this applies for anything which not exclusively non-Muslims do or follow.
An other interpretation
In the context of imitation ibn 'Othaymeen said (according this article in Arabic) that what our enemies the disbelievers do falls under one of these three things: worship, customs, production and work ...
He agreed that a Muslim is prohibited from imitating them in worship. He used the hadith we are discussing as an evidence to prohibit imitation in customs, while he allowed to imitate in work and production.
More details from the article:
There are four categories of imitation when it comes to the rulings of Islam about it (Note that the ruling must be based on evidences from Quran and sunnah):
- Imitation in worship is either shirk or kufr.
- Imitation which is a sin or grave disobedience like eating or drinking with the left hand, wearing gold or golden rings (for male), women imitating men and vice versa.
- Imitation which is frowned upon.
- Allowed imitation: This seems to go along with the fatwa from islamqa.
