A mongrel; a mixed-breed animal. Most commonly used about dogs. It seems to have started out as a shortening of "muttonhead," which was a general insult for anyone or anything seen as stupid. The first recorded use of the abbreviated version of the insult is from 1901, but only a few years later the current meaning is recorded, 1904 or 1906 depending on the source.

Mencken, H.L. The American language: An inquiry into the development of English in the United States, 2nd ed., rev. and enl.New York: A.A. Knopf, 1921. http://www.bartleby.com/185/27.html
"mutt." The American Heritage® Dictionary of the English Language, Fourth Edition. Houghton Mifflin Company, 2004. 05 Jul. 2010. .
"mutt." Online Etymology Dictionary. Douglas Harper, Historian. 05 Jul. 2010. .