I would say it was a combination of a few reasons that made Chamberlain, and by extension, the British government during that time, willing to appease Hitler ambitions.
First it had been less then two decades since WWI, which Britain was a major player in, and the memories of the horror of trench warfare, mustard gas and other supplementaries that that came with "The war to end all wars" would have put the kibosh on any hawkish actions that would have led to another war of that magnitude, as 1939-1945 would prove it would be. This is why Chamberlain figured if appeasing Hitler with such actions and "treating him with kid gloves" prevented sending his nation into another great war, so be it.
Second, the Nazi government's darker side was for the most part, mostly unknown, hadn't happened yet (aka the "Final Solution"), and what little had leaked out was dismissed or ignored. Meanwhile the powers that be in the Western World saw their hardline take on communism as a wonderful thing, which earned them a bit of leeway in annexing half of central Europe.
Third, Europe didn't have many allies at the time that would have joined them should they declare war on the Germans. Italy and Spain were firmly in the Axis camp, the United States was staunchly isolationist in nature, and Russia wasn't much happier to deal with Britain then it was with Germany. While Britain had her colonies, most were far from Britannia and not of a size to where they could match Germany's military might, plus most were vulnerable to a resurgent Japan, who was also in the Axis camp.
References: WWII history classes, WWII references books (can't remember the name of it as I don't have it any more, will continue to search)