In September 1939, after the German invasion of Poland, the Nazis decreed that Jewish stores should be easily identified with a distinctive mark. Soon after, it was decreed that the Jews themselves were marked. In Germany and all territory held by the Nazis, Jews complied with the new rule by wearing yellow armbands, white armbands with blue stars drawn on and white armbands with yellow home-made stars sewn on. Some non-Jews were also forced to wear special identification badges. In 1941, the yellow star we are familiar with was mandated for all Jews over the age of twelve.
Jews were responsible for buying and distributing the badges. One had to have a star for the front of your coat/shirt and the back. One had to have his star stamped by the Germans for a fee. If a Jew was caught without a badge, he was fined, imprisoned, or shot.