why does launcelot said that this jew is very much a devil incarnation

Lancelot, referred to as a clown, is the servant to Shylock. He tells the audience that he is thinking about running away from his master, whom he describes as a devil. However, he cannot make up his mind about whether to run away or not because his conscience makes him guilty when he thinks about leaving Shylock.

A devil incarnation is a form of the devil himself. Jews, of course, do not believe in Christ in the same ways as Christians hence the devil reference.