Contrary to popular belief, this is not just an insult.
Little Black Sambo was a series of children's books from the early- to mid-20th century. It centered around the titular character--a little
African-American boy named Sambo--playing
in the dirt, having a slice of watermelon, and doing many other things. As you may have guessed, this series is and was EXTREMELY racist. However, at the time it was considered very popular. If your parents or grandparents were children during the 50's or 60's, then ask them about Sambo, because chances are they'll remember him.
It can also be used as a
derogatory term, which is explored to a greater length in the other definition of this word.