The best insight I read from the book Urban Tribes:
Because we see ourselves reflected in our friends and they see themselves reflected in us, everyone has a stake in seeing the best in each other. "My friends are creative/wonderful/loving/smart" was the text. The subtext was: "Because they are my friends, I am also creative/wonderful/loving/smart."
This is related to the concept that people often attribute your attributions of others to yourself. For example, when you say, "John is really smart and interesting," people subconsciously think you are really smart and interesting, too. It goes both ways – so don’t talk bad about other people!