As a public school teacher, I can speak to this topic with some authority. The term "preppy" originally described members of old-money patrician families with traditional ties to private bording schools. They live on the East Coast or in the South, and they can afford to "summer" places.
At their best, true preps preserve the best traditions of Western Civilization. They try to be honest, humble, brave, principled and public-spirited. They wear simple, elegant, well-made clothing, and they wear it until it falls apart. The manufacturer is unimportant; true preps respect good craftsmanship, not expensive pricing. Although they wear the Classic American Wardrobe, they realize that they did not invent it (except for boat shoes... your grandfathers DID invent boat shoes), and they have no exclusive claim to it.
Classic preps with noteworthy ancestors see their forebears as people to be lived up to, rather than people to be bragged about. They recognize their privileged status, and they work to become worthy of it.
Classic preps work hard to develop both mind and body; achievement in both the classroom and on the athletic field are highly valued.
At their worst, preps are snobs. They take pride in money they didn't earn, power they don't deserve, and people they don't value. When they die they leave behind them an ocean of gin and tonic, a garage full of fine automobiles, a fantastic wardrobe, and a wasted life. It is good to appear in their will, but bad to appear in their presence.
Nowadays, though, the term commonly describes the upper strata of "popular" kids in many American highschools. I would argue that since this group vastly outnumbers traditional preppies, they perhaps have staked a greater claim to the word.
See that kid with the black pants, the nose ring and the mohawk? Instead of shoving him into a locker, I think I'll introduce myself and shake his hand, because I'm a true preppy.