The annotations for the Emperor's New Clothes fairy tale are below. Sources have been cited in parenthetical references, but I have not linked them directly to their full citations which appear on the Emperor's New Clothes Bibliography page. I have provided links back to the Annotated Emperor's New Clothes to facilitate referencing between the notes and the tale.

In a preface to a later collection of his tales, Andersen explained that "The Emperor's New Clothes," published in 1837, is "of Spanish origin." He went on to say, "We owe the amusing idea to Prince Don Manuel," who was born in the late thirteenth century. Andersen also pointed out that Cervantes used the idea in an "entr'acte." But if the idea of "The Emperor's New Clothes" was centuries old, it did not become international shorthand for all sorts of conformist behavior until Andersen wrote it his way (Frank and Frank 105).

2. Emperor: From Wikipedia:

An emperor is a (male) monarch, usually the sovereign ruler of an empire or another type of imperial realm. Empress is the feminine form. As a title, "empress" may indicate the wife of an emperor (empress consort) or a woman who is a ruling monarch (empress regnant). Emperors are generally recognised to be above kings in honour and rank.

Both kings and emperors are monarchs. There is no single rule to distinguish the one from the other: several factors, like interpretations of historians, the size and characteristics of the governed realm, and the title(s) chosen by the monarch play a part in distinguishing the one from the other. General characteristics indicating that a monarch is to be considered an emperor rather than a king include:

• The monarch goes by a title that usually translates as "emperor" in English, and/or is accepted as the equivalent of "emperor" in international diplomatic relations;
  
• The monarch rules (de facto or nominally) over other monarchs, without stripping monarchy-related titles from these subjects ("vassals" or non-sovereign monarchs);
  
• The monarch rules several formerly sovereign countries, or peoples from different nations or ethno-cultural provenance.
  
• The monarch assumes divine or other high-ranked religious characteristics (see: imperial cult, caesaropapism);
  
• European (Christian) tradition: The monarch traced his imperial title to Roman precedent or recognition by a Roman (Byzantine) emperor or supreme ecclesiastical official (the Pope or the Oecumenical Patriarch), see also: translatio imperii.
  

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3. His only ambition was to be always well dressed: Maria Tatar writes:

For Andersen vanity was the cardinal sin of human nature. Excessive attachment to dress appears particularly absurd in a monarch who allows it to interfere with his royal duties. Tall and gawky, Andersen was always self-conscious about his own physical appearance and found the airs of the aristocracy particuarly offensive (Tatar 270).

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4. He did not care for his soldiers: As the monarch, the emperor is the head of the military and his country's security. His ambivalence towards his soldiers is one way in which Andersen demonstrates the emperor's incompetence before the incident of the invisible clothing, showing that his vanity is not his only fault as a ruler.
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5. The theatre did not amuse him: Andersen's first love was the theatre. His lifelong dream was to be considered a great playwright, not an author of children's tales. Thus a lack of interest in the theatre is not a meritable quality in Andersen's eyes.
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6. Swindlers: Swindlers and tricksters are often the heroes of fairy tales and folktales, such as Jack in Jack and the Beanstalk. While the tricksters in this tale are not honest, they serve an important purpose and are not judged any more harshly than the emperor and his court in the tale. Their ability to pull of their scam is ingenius and rather admirable. Andersen, as narrator, is careful not to cast judgment on any of the characters, allowing their actions to speak for themselves to the reader.
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7. Weavers: Weavings and weavers are common in folklore and mythology. All Fiber Arts.com has an extensive listing of tales and other resources about weaving.

You can also read more about the process of weaving on Wikipedia.
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8. Wonderful quality of being invisible to any man who was unfit for his office or unpardonably stupid: The swindlers are wise and have some understanding of psychology to invent qualities for the cloth which play with the insecurities of those around them.
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9. “If I were to be dressed in a suit made of this cloth I should be able to find out which men in my empire were unfit for their places, and I could distinguish the clever from the stupid.”: The emperor little realizes he will be hoist on his own petard, or caught in his own trap. His rationalization also is another mark against his ability to be a good leader and emperor, demonstrating his own inability to distinguish the clever from the stupid. Looking for shortcuts in his duties, he does not trust his own instincts, rightly so it appears.
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10. All were anxious to see how bad or stupid their neighbours were: Andersen understands human psychology and the desire to judge and gossip about others. So do the swindlers who use this desire to fuel their elaborate trick.
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11. “Can I be so stupid? I should never have thought so, and nobody must know it! Is it possible that I am not fit for my office? No, no, I cannot say that I was unable to see the cloth.”: While the statesman is considered honest and worthy, the swindle still plays with his own self-doubt and succeeds in manipulating him.
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12. They kept everything for themselves: Besides the money they earned for their "work," the swindlers are pocketing all of the materials provided to them for making the cloth, increasing their salary and "take" from the swindle.
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13. “I am not stupid,” said the man. “It is therefore my good appointment for which I am not fit.": This statesman believes in his own intelligence but is insecure in his leadership position, so he still falls for the swindle.
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14. “Is it not magnificent?” said the two old statesmen who had been there before: The emperor is not the only fool in this tale--his leaders are equally at fault for refusing to admit to their own inability to see the cloth and thus furthering the swindlers' purpose. The deception continues to grow and become more complicated as each person contributes to the problem with their dishonesty.
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15. Burned more than sixteen candles: Sixteen candles and more would be a luxury and added expense to the making of the clothes. Sixteen candles also requires a significant amount of time to burn, so the swindlers maintain the appearance of hard work.
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16. “They are all as light as a cobweb, and one must feel as if one had nothing at all upon the body; but that is just the beauty of them.”: While the extra fine qualities of this particular cloth is an invention to suit the swindlers' purposes, fine and light clothing is not unusual in folklore. Heroines are often charged or credited with creating such clothing, such as Vasalissa in Vasalissa the Beautiful.
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17. Emperor marched in the procession under the beautiful canopy: Illustrators have long struggled with illustrating this key scene in the story, determined to meet the decency standards for a children's book in their respective times. Some, such as Arthur Rackham, Margaret Tarrant and William Heath Robinson, illustrated the parade scene in silhouette with a well-placed leg to hide the emperor's anatomy. Others, such as Edmund Dulac and Milo Winter, have kept the emperor in his underwear, a less satisfactory approach as it lessens the impact of the story. Another group have avoided committing the scene to illustration at all, choosing other, less problematic scenes, to highlight.
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18. Nobody wished to let others know he saw nothing, for then he would have been unfit for his office or too stupid: Everyone's refusal to admit to seeing nothing only serves to prove their stupidity and that they are unworthy to hold their offices or positions of leadership. Peer pressure and hypocrisy are strong motivators, often leading to increased embarrassment, as this story teaches.
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19. “But he has nothing on at all,” said a little child: The story supports the Biblical idiom, "Out of the mouths of babes." Over the years, the idiom has come to mean unexpected wisdom coming from children. The phrase originally appears in both the Old and New Testaments with a somewhat different meaning:

Psalms 8:2. Out of the mouth of babes and sucklings hast thou ordained strength because of thine enemies, that thou mightest still the enemy and the avenger.

Matthew 21:16. And said unto him, Hearest thou what these say? And Jesus saith unto them, Yea; have ye never read, Out of the mouth of babes and sucklings thou hast perfected praise?

Maria Tatar writes:

That it takes a child to cut through the hypocrisy of the adult world is a powerful insight that will be particularly appealing to child readers, many of whom will identify with the heroic child (Tatar 276).

Diana Crone and Jeffrey Frank write:

Andersen had already sent the manuscript to the printers when he wrote to Edvard Collin, who proofread his work, asking him to change the ending. In doing so, he added the famous line "which will give everything a more satirical appearance." That line may have originated in a childhood memory. In 1872, Andersen told the painter William Block about standing with his mother in a crowd, waiting to see King Frederik VI. When the king stepped from his carriage, Andersen said, "Oh, he's nothing more than a human being!" His mother, as Bloch recalled it in a memoir, tried to quiet him, and said, "Have you gone mad, child?" (Frank and Frank 110).

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20. Listen to the voice of an innocent child: The revelation of the emperor's nakedness needed to come from an innocent child to make the story most effective. The innocence shows that the child has no guile or need to pretend to see the clothing and thus quickly proves to the entire audience that the emperor is in fact, incontrovertibly, naked.
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21. Now I must bear up to the end: Pride is one of the greatest faults of everyone in the tale, unwilling to admit to possible stupidity or weakness, everyone falls to one of the greatest weaknesses of all.

Maria Tatar writes:

The emperor's tenacity and his unwillingness to concede an error, along with the chamberlains' insistence on carrying a train that does not exist, reveal the degree to which Andersen faulted the artistocracy for its resistance to embrace the truth or to change in any way at all (Tatar 277).

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