In the cladogram, we have 6 species or taxa, that have the characters in each node. These characteristics are shared by all the groups from that node and up, for example, jaws appear in the second node, so that means that the hagfish don't have jaws but the rest does.
If we look at reptiles (represented by the lizard) and mammals (that would include lion and chimp in this example) and want to separate them, we should look at the 5th node, the one that includes lion and chimp but not the lizard. Here we can see the new trait is hair, which is present in mammals but not in reptiles (C).