Last I checked, Fender had factories in California, Japan, and Mexico. At least the perception of build quality between those factories is that California makes the best quality guitars and Mexico the worst. Obviously labor prices are wildly different between Mexico and California with Japan falling in between, so the first major difference between different Fender models is the assembly location and the nominal build quality. It is my personal opinion that the perception of build quality is fairly accurate, with the Japanese models actually being the best bang for the buck.
After that whole mess, you get to much more concrete differences such as pickups, neck, fingerboard, and body woods, finish quality, hardware quality, electronics, etc. There are at least 100 - 200 components that make up a Fender guitar and all of them make a cosmetic or tonal different or both. And of course the different options have different prices.
I think back in the day people would buy a Strat and then customize it themselves. Now a lot of the most popular customizations are available right from Fender, since they realized they could make more money by catering to a wider audience.
By the way, Fender also has a separate product line called the Fender Custom Shop, also made in America, with a whole nother level of pricing, so the American Standard is not exactly the top of the pile.
In many forums and online sales, you'll often see the following abbreviations regarding Fender brand guitars:
- CS meaning Custom Shop
- MIA meaning Made in America
- MIJ meaning Made in Japan
- MIM meaning Made in Mexico
Also note that the Fender Squire series are the lowest end models and therefore are even distinguished by a sub brand name to provide a little distance from the main Fender brand. They are exclusively MIM I believe.
Also Gibson has a very similar setup. Epiphone is owned by Gibson and manufactures their budget versions in Korea. Gibson USA guitars are made in America and represent their main line guitars with higher quality and cost than the Epiphone models. And Gibson Custom Shop guitars are their highest end brand.
Many other brands do similar things. G&L makes their G&L brand guitars in Fullerton, CA and their G&L Tribute models overseas. PRS guitars are made outside Annapolis, MD except their SE guitars are made overseas. Taylor Guitars operates their main factory in El Cajon, CA with a factory right across the border in Tecate, Mexico for their low end models.