A derogatory name for someone of Middle-Eastern descent. Probably the most common usage is in reference to Selami bin Hiden, I mean Osama bin Laden. Especially given the circumstances in Iraq, a diaper head is not a good thing to be.
Redneck 1: "Dude, look at that diaper head over there at the pump"
Redneck 2: "Gawdamnnit! Where's my gun?"