The years leading up to the start of World War II (which began in September of 1939) saw a series of bold moves by Nazi leadership. Over the course of the 1930s, the Nazi government steadily broke with the provisions of the Versailles Treaty. While the (pre-Nazi) German state had already suspended reparation payments, once the Nazis were in control they simply refused to negotiate the possibility of the payments ever resuming. By 1934, in secret, Germany began the process of re-arming, and then in 1935 it openly moved toward building a military that would dwarf even its World War I equivalent.
By 1938, Hitler felt that Germany was prepared enough that it could sustain a limited war; by 1939 he felt confident that the German war machine was ready for a full-scale effort to seize the space he imagined for the new Reich. In a sense, this period consisted of Hitler "playing chicken" with the rest of Europe: he would launch a dangerous and provocative initiative, then see if the rest of Europe (meaning primarily France and Britain) would respond with the threat of force or instead back down. The political leadership of those nations did back down, repeatedly, until the invasion of Poland in September of 1939 finally proved to the world beyond a doubt that Hitler could not be stopped without war.
This is the period remembered as “appeasement.” The term refers to the policy adopted by the French and British governments in giving Hitler what he wanted in hopes that he would not do it again. Pieces of foreign territory, political unions with closely related German territories, and the growth of German military power were seen by desperate British and French politicians as things that Germans might have legitimate grievances about, and thus they played along with the idea that Germany, and more to the point Hitler, might be appeased once those issues were addressed.
It was a popular critique long after the war to vilify the French and British leadership for being willing to concede so much to Hitler when a strong militarized response might have cut the rug out from under the Nazi war machine before it was ready for its full-scale assault. Arguably, one should not be too quick to write off appeasement. World War I had been so awful that it was very difficult for most Europeans, even most Germans, to believe that Hitler could actually want to plunge Europe back into another world war. It is certain that the French and British wanted to avoid full-scale war at any cost; their civilian populations were totally opposed to war and, especially in France, their governments were unstable and unpopular as it was. Thus, British and French political leaders did not think of their concessions to Hitler as caving in: they thought of them as preserving peace.
In March of 1938, Germany annexed Austria, an event known as the Anschluss. Despite the German pseudo-invasion being poorly organized, most Austrians welcomed the German tanks that rolled into Austrian cities, and there was practically no resistance. Germans were at first apprehensive that this blatant violation of both the Versailles Treaty and the sovereignty of another nation would result in war, but instead it became a public relations boost for Hitler and the Nazis when there was no foreign response. In one fell swoop, Nazi laws and policies (most notably the entire edifice of anti-Semitic legislation) were imported to Austria, and there was a looting spree as Catholic Austrians attacked their Jewish countrymen.
In September of 1938, the threat of German intervention in the Sudetenland, a region of northwestern Czechoslovakia with a significant German minority, prompted an international crisis. The British and French governments hastily convened a conference in Munich to stave off war, and there, instead of defending Czech sovereignty (which the Czechs were demanding), the French and British agreed that Germany should annex the Sudetenland to “protect” its German population. Then, in early 1939, German troops simply occupied the rest of Czechoslovakia. The Czech lands were divided between Germany and a newly-created protectorate, while Slovakia became a puppet state under an anti-Semitic Catholic priest, Jozef Tiso.
Even as Germany was expanding its territories against a backdrop of international vacillation, it was forming political alliances. In May of 1939 Italy and Germany pledged alliance with one another, more or less a formality given their long-standing fascist kinship. More importantly, in August of 1939 Germany and the USSR signed the Molotov–Ribbentrop Pact - a mutual non-aggression pact. This pact was absolutely crucial for the Nazis, as they could not envisage a successful war against Western and Northern Europe unless the major eastern threat, the USSR, was neutralized. Whereas Hitler had absolutely no intention of honoring the pact in the long term, the Soviet Premier Josef Stalin did, believing both that Germany was not strong enough to threaten Soviet territory and that the future war (which he accepted as inevitable) would be a squabble among the capitalist nations that did not involve his own resolutely communist state. To sweeten the deal for the Soviets, the pact secretly included provisions to divide Poland between Germany and the USSR in the immediate future.