The word "hoosier" was initially a derogatory word from the South used to refer to rednecks, hicks, etc. As the word traveled north to Indiana, the meaning changed to something more neutral or even positive. However in St. Louis, we know the true meaning. Research below.
From
http://www.indiana.edu/~librcsd/interne ... osier.html
Origination of the Word "Hoosier"
The best evidence, however, suggests that "Hoosier" was a term of contempt and opprobrium common in the upland South and used to denote a rustic, a bumpkin, a countryman, a roughneck, a hick or an awkward, uncouth or unskilled fellow. Although the word's derogatory meaning has faded, it can still be heard in its original sense, albeit less frequently than its cousins "Cracker" and "Redneck."
From the South "Hoosier" moved north and westward with the people into the Ohio Valley, where it was applied at first to the presumably unsophisticated inhabitants of Southern Indiana. Later it expanded to include all residents of the state and gradually lost its original, potent connotation of coarseness in manners, appearance and intellect.
As for the word itself, it probably derives from the Saxon word "hoo" meaning promontory or cliff or ridge or rise or hill. Jacob Dunn, a diligent scholar of the word, believes a Saxon beginning, and such a meaning survives in various place names in England. There is some sense in the notion, too, that those who applied the insult and those to whom it was applied (and who understood it) came primarily from British stock.
The unusual (ier or sier) ending has always been difficult to explain. Might it be from "scir" the old form of "shire?" The Hoo Shire would then be the Hill Country, the High Places or the Mountain Region. Would that meaning then extend to those who lived in the hills, making them the "hooscirs" and later the "Hoosiers," the mountain people, hillbillies by another name?
St. Louis' Influence
While "hoosier" may still be heard in areas of the south in its original, disparaging meaning of "uncouth rustic," the term seems to be slowly loosing currency. One important pocket of linguistic resistance, however, remains. Thomas E. Murray carefully analysed the use of "hoosier" in St. Louis, Missouri, where it is the favorite epithet of abuse. "When asked what a Hoosier is," Murray writes, "St. Louisans readily list a number of defining characteristics, among which are 'lazy,' 'slow-moving,' 'derelict,' and 'irresponsible.'" He continues, "Few epithets in St. Louis carry the pejorative connotations or the potential for eliciting negative responses that hoosier does." He conducted tests and interviews across lines of age and race and tabulated the results. He found the term ecuminically applied. He also noted the word was often used with a modifier, almost redundantly, as in "some damn Hoosier."
In a separate section Murray speaks of the history of the word and cites Baker and Carmony (1975) and speculates on why Hoosier (in Indiana a "neutral or, more often, positive" term) should remain "alive and well in St. Louis, occupying as it does the honored position of being the city's number one term of derogation." A radio broadcast took up where Murray left off. During the program, "Fresh Air," Jeffrey Lunberg, a language commentator, answered questions about regional nicknames. He cited Elaine Viets, a Post-Dispatch columnist (also quoted by Paul Dickson), as saying that in St. Louis a "Hoosier is a low-life redneck, somebody you can recognize because they have a car on concrete blocks in their front yard and are likely to have just shot their wife who may also be their sister."