Hitting off in the marketplace
The German word Schlager (it is a noun, so it’s always capitalized in German) just means a “hit tune", in the sense of “hugely successful pop tune” (from German zu schlagen = to hit).
Tears make money
The word originated in the 20's and 30's, at a time when gramophone records started to be marketed in quantity and when at last a hit could be objectively judged -- by the amount of money it made. At the time most hit songs tended to be a bit more sentimental-sounding than the hits of today. Still, there is nothing intrinsically sentimental about the Schlager concept, in spite of the fact that most Schlagers were (and are) unvarnished attempts at jerking tears. The present-day meaning thus has a tendency to blend with the meaning of the equally German word “Schmalz” (= originally “molten fat”; in this connection = an overly sentimental -- gooey -- song, film or story).
The concept “Schlager” used to connote a lucrative entry in the “trivial music” category, in the same manner that the present-day designations “hit song” or “hit tune” refer to musical trivia. What made an inconsequential tune a Schlager was that for some (often inexplicable) reason it happened to be appreciated, bought or sung by huge crowds, turning the acoustic venture into a financial success. So designating a song a “hit” or a “Schlager” does not refer to its musical character or qualities. Rather, the concept is used to convey the financially objective fact that this particular piece of musical crap has turned out to be a Golden Egg.
Trivial shift of linguistic habits
In the period Between the Wars (the 20’s and the 30’s) the word Schlager was used as a synonym for “hit song” in most countries with some understanding of the German language -- e.g. Scandinavia, Central and Eastern Europe -- but it was hardly used or even understood in English-speaking countries. After World War II the English language has overwhelmed most parts of the world, including the old “Schlager-territories”. Instead of talking about last year’s “Schlager”, people started discussing the latest “hit” -- in continental Europe, in Scandinavia, as well as elsewhere.
This shift of linguistic habits has had an interesting petrifying effect, preserving the history of popular music preferences like a conceptual fossil. So the meaning of the original concept of Schlager has solidified into something quite different from what it used to mean. Instead of just connoting a commercial hit, without regard to musical type or category, the word Schlager now designates the type of songs that happened to be hits on the continent in the 1920’s and 1930’s, i.e. overly sentimental musical trivia.