Disparaging word, racial epithet and/or slur used to insult Hispanic immigrants. In almost all cases of use it is considered extremely offensive for its negative connotations of poverty, migration and social status.
The "official" source of the word seems to be the controversial Operation Wetback - courtesy of the INS - in 1954 along the Rio Grande at the end of "the decade of the wetback" from 1944 to 1954 in which illegal immigration increased 6,000%
It is more than likely that the term "wetback" originally derives from the way immigrants usually had to swim and ford the Rio Grande before continuing their pilgrimage across the harsh deserts in wet clothes.
Alternatively or additionally - and according to my local-lore filled step-grandfather - "wetback" also derives from the practice of soaking one's shirt and either wearing it normally or draping it over one's head and shoulders like a cowl to stay cooler in the brutal and unforgiving heat of the deserts and badlands that dominate the US-Mexico border. (See also: tire sandals or tie tread shoes or something similar.)
Sources:
Kim Pearson - http://kpearson.faculty.tcnj.edu/Dictionary/wetback.htm - which cites the book Operation Wetback, (1997).
Grandpop, on a trip to the Anza Borrego and Salton Sea areas as he attempted to explain a vintage "humorous" cartoon postcard my brother and I had seen in one of those typical roadside cafes stuffed and plastered with memories, antiques, artifacts and character thick enough to give you food poisoning. Grandpop knew agriculture, taught it, ran a "living farm" museum, and when younger, worked it. I remember distinctly how upset he was and that in his eyes I could see the respect for these impossibly hard-working and large-hearted people even through the rage that he'd have to explain this to little kids. I remember looking out from the shade of the trees in that small oasis in asolute awe and wonder at the boiling furnace of a landscape, barely able to fathom how someone could walk from who knows how far south of the border to hundreds of miles north to where the work was.