They used a system whereby features like number of masts, funnels, and deckhouses are identified. This can narrow ship classes down pretty easily.
Furthermore, it was possible to guess likely dimensions and draft for ships based on visual observation, so even if you didn't ID the exac ship type you could usually set your torpedoes to the correct draft, & so on.
Lastly, certain classes of ships were extremely common on the North Atlantic. For instance, the "War" class 5200 ton freighters and British Tanker Co. 7000 ton oil tankers (about 100 of each in service at the start of the war). Civilian ID books like Talbot Booth's merchant handbook would give the exact dimensions for these types of vessels.
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