The LHS counts the number of ways of choosing k people from a group of n+1 people. The RHS first chooses 1 person from n+1 people and then the remaining k−1 people from the remaining n people. I just don't understand why is the RHS divided by k?
Answer
As you said, the LHS counts the number of ways of choosing k people from a group of n+1 people. On the RHS, there are n+1 ways to choose a member of the group and \binom{n}{k - 1} ways to choose the remaining members of the group. However, if we simply multiply those two factors, we will have counted the group k times, once for each way we could select one of the k people in the group first. Therefore, we need to divide by k since the order in which the members of the group are selected does not matter.
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