For an American who hasn't traveled around Germany and noted all the possible hotel options, this is one of those essays where I offer some humble opinion and travel suggestions.
Most all German hotel options will note their stars....unless of course it's a one-star place. It doesn't really mean a big negative to use a one-star place but you might want to ask questions and observe past comments.
One star: It'll typically be a pension or small hotel operation. On the positive side....it's just a plain room....heated....plain bath (although the bath might be in a hallway and you have to share among two or three guests)....and simplicity. It doesn't really mean that it's crapped out or dirty.
I would suggest in a lot of rural region of Germany....pensions are the more likely option available and very reasonable for the amount required.
I stayed in Ramsau twenty years ago at a small pension within the town. It had around six rooms....offered up a decent breakfast....and I paid roughly $20 for a family room. It turned out to be one of the best hotel stays in my life.
If I were using a one-star hotel in an urbanized area like Berlin or Stuttgart....I might ask a lot of questions and look at previous reviews off Tripadviser.
Two star: In small cities (K-town for example), a two-star will run you around 35 Euro. Most offer the basics. Breakfast (European style of course) will normally be part of the deal, but you might want to read through the fine-print.
Three star: There is this thin line between a two and three star. You might find yourself in a three-star place and shaking your head because your room has at least ten deficiencies.
I stayed in a three-star on the outskirts of Berlin once....which the front desk gave me a key to a room on the 9th floor....oddly enough, the elevator ONLY went to the 8th floor. Silly me, I wasted five minutes look for this room and eventually came to realize that I had to walk up some stairs to reach the next level. It was a decent room, but this lack of elevator stood out for me.
Four star: Generally, a German hotel with this rating is going to cost you a minimum of 100 Euro per night. In the off-season, or with low numbers....you might actually find some places in the 50 Euro range.
Do the stars really mean much? For some people....yes. It's an assurance over the quality of the place. I stayed once at a Dutch four-star which was probably one of the most plain hotels I'd ever been to in my life. It was almost like a military barracks room. Course, it was neat and tidy....no real complaints.
I would offer these three bits of advice when selecting hotels in Germany:
1. Look at previous guest comments off Tripadvisor.
2. If you are traveling by car, then parking matters. Most urbanized German hotels don't offer free parking (they charge for it). Most hotels on the outskirts of town....will have ample free parking. If you aren't traveling by car, then stay in the heart of the city and near the U-Bahn/S-Bahn locations. I generally don't advocate staying at hotels across from the train-stations.
3. Typically, AC is not a big deal in the summer. Course, I will suggest that in some really miserable periods of July and August....you might want AC. If you pick a place without AC....you might want to make sure that the hotel isn't on some busy street where noise will be a big deal if you leave your window open.
Just my humble advice.