The description here is very apt—wolves in sheep's clothing. They appear on the outside to be something they are not. When Jesus uttered this, He was probably thinking of false ministers who would insinuate themselves into the church by appearing to be sheep within the sheepfold.
Jesus uses this terminology in regard to His relationship with the church. He was the Shepherd, and we are His sheep. Here we have wolves (false ministers) who look like sheep, but it is hypocrisy. They only look that way on the outside. He tells us we will know them by their fruits. The fruit that is produced will not necessarily appear quickly. But Christ guarantees that over a period of time the church will be stripped of its true spiritual vitality in terms of the character that will be produced within the flock, making the rise of wolves in sheep's clothing more likely.
What is He saying? The implication is that Jesus is connecting belief with practice. If we believe a certain set of doctrines, we will practice something because of the teaching. A religious creed or the dogma that a group is following will produce a certain kind of conduct by the people. Belief and practice, creed and conduct—Jesus is saying they are vitality connected. In other words, the teachers cannot hide what they are going to produce. Eventually it will come out. Their false philosophies, no matter how attractive they may appear at first sight, will in the long run be exposed for what they really are.