I recently had to decide whether to spend some money on a new laptop, or commissioning a blacksmith to make me a reproduction of a spearhead I'm studying for my dissertation. (I went with the spear :p).

These two transactions, though involving similar amounts of money, work very differently.

To buy the spear from the blacksmith, I don't just go to his website and click 'buy'. Instead, I had to email him, explain my project, and ask if he were interested. He responded by sending me a friend request on facebook, and we chatted about the various requirements, historical sources, and objectives of what I wanted made. He then agreed it was something he'd like to do, and quoted me a price. This interaction was incredibly personal, and I'm very aware of the human who is making the thing I need. We're not friends strictly speaking (this is business), but we do have a relationship. And that relationship, honestly, is part of why I'm willing to spend the price of a cheap laptop on his work - I know I'm paying a skilled craftsman for his knwoledge, and that I'm supporting his art.

That is how, for much of human history, most business was conducted.

In contrast, had I bought the cheap laptop, I would have read anonymous reviews, clicked a button, and a few days later, a stranger would drop it off in front of my house and I would have the thing I wanted. The entire transaction, from the reviews to the delivery, would focus entirely on laptop. Inwould never meet, nor care to meet, the people who made it. In fact, many people don't even realize that all the tiny screws on our laptops and phones were actually screwed in by hand - we just assume machines do it. We're that focused on the objects, and our ability to buy them, and that uninterested in humans living in poverty who made them for us. The workers don't actually matter, so long as we get the laptop we want.

That's fetishizing the commodity.

our tendency to view social relationships of production, not in terms of relationships between people, but as economic relationships between money and commodities.

The relationships between humans, between maker and consumer, are replaced with me purchasing a product that might as well be made by Santa's elves for all I care where it comes from.

Thus, capitalism exploitive nature is hidden from view.

The fact that this stuff is made by exploited workers is completely invisible, because the item itself is so exciting I never think to ask where it was made, or whether they were treated well.

Marx says that capitalism works this way, replacing the old system of human relationships like the one I have with my blacksmith.

You'll first want to understand that when he uses the term "fetish" here, he's not doing so in the sexual context more common to us today, he's referring to fetishes as religious icons. In that context, a fetish is believed to be a sort of conduit between a worshipper and the god or spirit represented by the fetish, by which the worshipper's prayers are granted.

The fetish itself is considered valuable. Marx is arguing that objects are considered valuable in and of themselves, rather than for their utility. An example would be someone who values an iPhone, not because they find it particularly useful, but because the very object itself is something that they fetishize. My favorite author on the subject, and indeed economics generally, is Thorstein Veblen. I highly recommend reading The Theory of the Leisure Class, it should help you understand what Marx is driving at.