What is the origin of the word "wog"?

Some friend of mine told me it was an acronym for "western oriental gentleman" and was a form of sarcastic politeness. Is this true, and is it offensive to use this word?

Etymonline gives its derivation as:

wog c.1920, "a lower-class babu shipping clerk" [Partridge]; later World War II British armed forces slang for "native of India" (especially as a servant or laborer), possibly shortened from golliwog. Many acronym origins have been proposed, none found satisfactory.

So the acronyms may be folk etymology.

In the UK it is a "racially offensive slang word referring to a dark-skinned or yellow person from Africa or Asia." (link: "wog")

In Australia it was a slang term used to describe common illnesses, such as the cold or flu. It then became a derogatory term, as above. Recently, beginning in early 1990's, it became a backronym for "Worthy Oriental Gentleman", embraced by those who the term was used to describe; now used more affectionately (could possibly be considered "sarcastic politeness").

It can be an acronym for several other things:

• "Whole Of Government. Used to describe Australian Government-wide outsourcing contracts"
• "Working On Government Service, referring to Indians working for the British Raj, or referring to Egyptian labourers working on the Suez Canal during the British Occupation in the early 20th Century."
• "Western/Westernized/Wild/Wily/Worthy Oriental Gentleman."

Primary Source: http://en.wikipedia.org/wiki/Wog