Classification plug-in is responsible for customization of the iterations and structure of entire Team Project. Its official name is Microsoft.ProjectCreationWizard.Classifiation.

We control iterations and structure via Classification.xml file located inside Classification folder in the Process Template.

Iteration defines the amount of time project activities will be repeated. The idea here is to implement iterative development with the set amount of iterations. Iterations are embedded into each Work Item and stored in the System.IterationPath field for each of those items.

Root node for one or multiple iterations is defined like shown below. Each iteration will have its own node element.
<Node StructureType="ProjectLifecycle" Name="Iteration1" xmlns="">
<Node StructureType="ProjectLifecycle" Name="Iteration2" xmlns="">

Areas are representations of the key groups on the Team Project. For example, we may have project broken into different layers, such as client layer, application layer and db layer. All work items then for each of these layers will be stored in each corresponding area.
<Nodes>
<Node StructureType="ProjectModelHierarchy" Name="Teams" xmlns="">
<Children>
    <Node StructureType="ProjectModelHierarchy" Name="Client"></Node>
        <Node StructureType="ProjectModelHierarchy" Name="Server"></Node>
</Children>
</Node>
</Nodes>