The credit and the debt the overview noted. The credit: Humboldt opened the way to a typology of languages by structural type. The debt: he attached an implicit ranking to those types.

1. Four structural types

how "grammatical relation" is marked isolating: by separate words and word order (Chinese) wǒ / kàn / shū — words do not change agglutinating: by attached affixes (Turkish, Japanese) ev-ler-im-de (house-PL-my-in) — affixes strung together inflecting: by internal change and fused endings (Sanskrit, Latin) amō / amās / amat — one ending carries person, number, tense at once incorporating: sentence elements fused into one word (Nahuatl and others)
Humboldt's criterion: how tightly grammatical relations are woven into the word. The four types are degrees of that. Diagram: L/LAB

Humboldt divided languages by how they mark grammatical relations, into four. Isolating languages (Chinese) do not change their words, and show relations by word order and function words. Agglutinating languages (Turkish, Japanese) attach affixes of clear meaning one after another to a stem. Inflecting languages (Sanskrit, Latin, Greek) alter the inside of the stem and let one fused ending carry person, number, tense and more. Incorporating (einverleibend; many languages of North America) fold the elements of a sentence into a single word. This fourfold scheme is still the basic vocabulary of morphological typology (though pure types are rare and most languages are mixed).

2. The hidden ranking — inflecting at the top

isolating agglutinating incorporating inflecting (Sanskrit) the tacit premise: "the type that realises grammatical form most purely" = the peak of development
Humboldt read the four types as a "ladder" by degree of realised grammatical form, and put inflecting languages at the top. Diagram: L/LAB

Here the problem begins. Humboldt took inflecting languages to realise “grammatical form (grammatische Form)” most purely. Of isolating Chinese he judged that form stays outside the word, uninternalised (though he did admire the very terseness of Chinese — this is not a crude better/worse scheme). Still, on the whole, the four types were read as a ladder by “how much grammatical form is realised.” At the top: Sanskrit.

This view took deep root in nineteenth-century linguistics. August Schleicher and others tied it to a language “evolution,” reinforcing the ethnocentric story that “the Latin / Greek type is the endpoint of development.” Worse, a language’s “stage of development” was reread as an index of its speakers’ “stage of intellectual development,” feeding racial thought.

3. Sapir takes it apart

a ranking (ladder) up = "advanced" language a flat space of several axes degree of fusion degree of synthesis no up, no better. Every language just sits somewhere.
After Sapir, typology moves from "one ladder" to "a space of several independent axes, with no better or worse." Diagram: L/LAB

Edward Sapir, in chapter 6 of Language, denied this ranking head-on. His jab —

A linguist that insists on talking about the Latin type of morphology as though it were necessarily the high-water mark of linguistic development is like the zoologist that sees in the organic world a huge conspiracy to evolve the race-horse or the Jersey cow.

For Sapir, every language is equally a “formal language,” and simple and complex languages alike are found at every level of culture. He lifted typology off the single ladder and split it into several independent measures (technique: isolating / agglutinative / fusional / symbolic; degree of synthesis: analytic / synthetic / polysynthetic; the kinds of concept expressed). Not better or worse — just position. This programme carries on into Joseph Greenberg’s work on language universals in the later twentieth century, and into sampling-based, descriptive, non-evaluative typology such as the World Atlas of Language Structures (WALS).

In sum

Humboldt (1836)after Sapir
The frame of typesisolating, agglutinating, inflecting, incorporatingframe kept (but mixed types are the norm)
How the types are arrangeda “ladder” by realised grammatical forma flat space of several independent axes
The topinflecting (Sanskrit)there is no top
Types and speakers(in later appropriation) an index of intellectual stagetype has nothing to do with speakers’ intelligence

Why it is still read

The Humboldt feature: overview / energeia / inner form / worldview / infinite use of finite means / the organ of thought, and dialogue / this essay.