Uchi–soto is the distinction between in-groups (内, uchi, "inside") and out-groups (外, soto, "outside").
That is achieved with special features of the Japanese language, which conjugates verbs based on both tense and politeness.
One of the complexities of the uchi–soto relationship lies in the fact that groups are not static; they may overlap and change over time and according to situation.
The workplace is a typical example: the employees below a middle manager are in his in-group and may be spoken to using casual speech.
Similarly, an overnight guest is offered the best sleeping arrangements even if it greatly inconveniences the rest of the family.
That case is a difficult point for Westerners in Japan, who have usually been taught to be polite by refusing accommodations that inconvenience others.