It is politics.

It is extreme individualism and liberty--nobody else can tell you who or what you are. Whoever or whatever you say you are, others must respect that.

But you don't define who and what you are for fun, out of curiosity, out of confusion, and probably not even out of any psychological need for a stable sense of self. You do it for the benefits of group membership. If it benefits you to associate with this group, you identify as an individual with traits that correspond to traits of other members of that group, such as belief in the existence of God or the belief in the need for the state to regulate markets.

It is individuals freely associating with other individuals according to perceived or actual similarities, common interests, solidarity, etc. If part of you doesn't fit the group--maybe you are homosexual but the group, such as a religion, rejects homosexuality--often people ignore, downplay or deny the difference or try to conform. If the differences between you and the rest of the group become impossible to maintain, you associate with a different group.

It is using your power and freedom as an individual to define who and what you are in order to align with other individuals for mutual benefits.

I am aware that what I am describing might be similar to psychological concepts like individuation and self-actualization.

However, I think that the important thing to see is that identity is political--it is about playing the game of, as Harold Lasswell defined it, who gets what, when and how. Greater political freedom has resulted in an increased number of identities and the post-modern phenomenon of people mixing and taking on many different identities. "Us" and "Them" have probably never been more diverse, and individuals have probably never had as much freedom to decide which one or more "Us" and "Them" they belong to.

It seems like now if you don't have a clearly defined identity people will either accuse you of being morally irresponsible or they will assign an identity to you themselves.

But you can always say that you are exploring, evolving, etc. You can always wait until the identity that gives you the most benefits comes along before committing to anything, if it ever does come along.

In a perfect world the identity that one chooses corresponds almost exactly with his/her passions, values, goals, etc. Probably not many people are that lucky. Recognizing that asymmetry between your self and your identities is probably the key to not letting identity be a detriment.