This can be confusing; for a good summary, though, see the Dead Kennedy's song, Terminal Preppie. I believe the above is the correct spelling, (because Jello Biafra says so, and Jello Biafra's always right) but see also preppy.
The preppie subculture arose in the late 1970's as a sort of elite caste of the idle-moderately-wealthy. Following the early 80's credo, money is important, but since most preppies were born to wealthy parents, making it isn't. Preppie style originated on the East Coast, mostly around college towns, with relatively wealthy college kids trying to sport fashions that looked cheap and cost a shitload. Tweed coats were big, as were polo shirts and khaki slacks. Golf was big, because that's what daddy played and it was a great opportunity to make nice with prospective employers.
Don't laugh, but there's a big difference between old school and modern preppies. Old school preppies were born wealthy, live a comfortable life, hate work, shop at old family run stores that have been around for generations, and drive suburbans and wood-paneled station wagons as family cars. The modern preppies just smack of effort: they try hard to achieve the look, drive SUV's, generally have to earn their money, and shop at Abercrombie and Fitch and the Gap because they think that's what a preppie should do.
The latter are much more contemptible. There's no reason to be ashamed of what you are or your background; if you act like that because you were bred to be an asshole and it just comes naturally to you, then so be it. Modern preppies try to be assholes, probably because they think it's cool, and never quite make it. Makes me want to kick their asses.
The sins of my youth. Not even a mention of the origin of the word? Preppies as the products of Preparatory Schools? Quoting Jello Biafra? What the dickens was I thinking? The blatant spelling errors should be out now, what? (Thanks to sirnonya). Should anyone write something worthwhile here, let me know, and I'll have this drivel removed.