After Hitler's success in Austria, it was only a matter of time before he would look further afield. His next target was Czechoslovakia - particularly its western Sudetenland. This area held about 3.5 million ethnic Germans, and so would be perfect to exploit along similar lines.
Hitler helped stir up the Sudetens, and exploited their excitement after Austria.
Propaganda made a big deal about Germans languishing under foreign domination, but that was all a ploy. He wanted Czechoslovakia, and would dismember it piece by piece.
However, Czechoslovaki was stronger armed, and prepared to stop Hitler's expanse to the East.
Prelude to the Munich crisis
The Munich Crisis
Benes made a surprising move when he offered the Sudetens essentially all the rights and freedoms they had been demanding under the Czech "oppression." Hitler and the Sudetens were stunned and unsure what to do. They didn't want a concession yet... not until they had the "right" to invade. However, Benes knew the real plan and wanted to show Hitler as the aggressor.
Chamberlain flew to meet Hitler, and appeased him again. Hitler could annex the Sudetenland, as soon as the logistics for a smooth transition could be worked through.
Benes found himself pressured to accept these terms, and did so. The crisis seemed to have passed... but Hitler didn't want it to be resolved so quickly.
Hitler announced that he would occup the area, militarily, on October 1st. Benes prepared to mount an armed response. This would certainly lead to war, and Britain and France panicked again.
The Munich Conference/Pact
Mussolini entered the picture. He suggested a four-power conference at Munish. At this meeting, Hitler gave Mussolini terms that he wanted, and so he began to back Hitler in his move here.
Hitler stated that he would delay the occupation until October 10th. That gave Britain and France time to pressure Benes to stand down. Under the pressure, and realizing that he stood alone, Benes resigned. He was replaced by Emil Hacha.
Chamberlain stepped off the airplane in London and announced triumphantly that "...this is the second time that there has come back from Germany to Downing Street peace with honour. I believe it is peace for our time."
Hitler, on the other hand, stated, "I have no more territorial demands to make in Europe." It was just one more lie.