The word punn itself is thought to be originally a contraction of the (now archaic) pundigrion. This latter term is thought to have originated from punctilious, which itself derived from the Italian puntiglio (originally meaning "a fine point"), diminutive of punto, "point", from the Latin punctus, past participle of pungere, "to prick."
The word today is used in slang, especially on the streets of major East Coast cities. Use of the word is often a sign that violence may break out as it's connotation is much more severe than punching and refers to not just a hit but a destructive blow.
Unfortunately, suburban teens and college students have re-popularized this term, decreasing the power of this word. The word “punn” is used as a pun for “pun”. For example:<br>
Person 1: “If you show me a piano falling down a mineshaft and I'll show you A-flat minor.”<br>
Person 2:”I should punn you for that pun!”
The first and only large exposure of the word to the mainstream media happened during the 1989 "Greekfest" riots of 1989 in the city of Virginia Beach, VA. Much of the rioting simply looting due to vacationing college students being made unwelcome by the city, however several instances of related violence were a result of gang rivalries that broke out in the chaos. One instance was caught on camera with two opposing males verbally threatening each other. In this instance "punn" was used as a verb and footage was aired on several local news channels.
In 1991 the word was once again broadcast on WJLA Washington during the Mount Pleasant riot in Washington DC. This instance showed that the use of the word was spreading along the east coast (Washington DC is located 200 miles from Virginia Beach) and was also seen by many more viewers.
As a result the word's popularity skyrocketed and was sometimes seen throughout the early 1990's. It was used in the 1995 hit movie Top Dog starring Chuck Norris.
Since that time the use has dwindled. Although never a very popular insult, it's use was very powerful in regions where the term was well known (much more than even strong vulgarities).