In Colonial Mexico, the terms cholo and coyote co-existed, indicating mixed Mestizo and Amerindian ancestry. Under the casta system of colonial Latin America, cholo originally applied to the children resulting from the union of a Mestizo and an Amerindian; that is, someone of three quarters Amerindian and one quarter Spanish ancestry. Other terms (mestizo, castizo, etc.) were used to denote other ratios of smaller or greater Spanish-to-Amerindian ancestry.
The word "xolotl" (pronounced "cholotl") is an Aztec word which means dog. It is from this meaning that the word "cholo" developed its negative connotation, taking on a similar meaning to "mutt" as applied to humans.
Mira ese cholo, he thinks his shit don't stick!