This Hadith lays down a very important principle. Unfortunately, Muslims have not attached any importance to this Hadith and the principle given in it with the result that innovations in the Deen have become so common that they have been taken for true Deen; our people act upon them and are made to practice them. One reason for this is their lack of education and ignorance about Deen. The second reason is their lack of understanding of the principle prescribed in this Hadith although it is stated in very explicit terms.
The principle that we learn from this Hadith is that every such action or activity is innovation which is done as a virtue and to gain the Pleasure of Allah but is not consonant with the teachings of the Qur'an and Sunnah, or which does not agree with the interpretation of the Nuss (text) given by the Companions of the Prophet (PBUH) or their successors (Tabi`un). The reason being that the period of the Companions and the Tabi`un is the Khair-ul-Qurun (the best of all generations). Thus any action or activity that is deprived of the support of these generations falls in the category of heresies.