When we examine this concept, it is easy to see that it is defined merely by what it is not. So Nietzsche is certainly not arguing that there is some real world apart from appearance that is hidden from us. The way human beings think about and perceive the world relies largely on making generalizations about things outside of ourselves. Nevertheless, no single one of these experiences is identical to any other. Forming these concepts means falsifying our actual experiences.
Every concept arises from the equation of unequal things.
Of course, these categories are what enable us to survive the world. It is not even possible to imagine what our thought-processes would be like if we did not have them. But regardless of whether they enable survival, an essential falsification is involved. Human beings wish to believe that the world operates according to the laws of logic, but these laws are themselves nothing but human constructs that falsify even our own sense-data. We believe that we are reading an order off of the world, that we are conforming our beliefs about the world that we observe.