I recently checked out a tape called "Spanish for Gringos." On the cover of the the accompanying workbook was the following:
gringo n, pl gringos [Sp, alternate of griego Greek, stranger, fr Latin Graecus, Greek] (1849); a foreigner in Spain or Latin America, esp. when person is of English or American origin....
(Webster's Ninth New Collegiate Dictionary)
I'm pretty sure the dictionary is right about the word's etymology. But I had learned a more colorful story: that Mexican-American vaqueros came into contact with Irish-American cowboys after the United States acquired first Texas, and then New Mexico and California. The Irish cowboys were constantly singing the song, "Green Grow the Lilacs." The first two words of the song were slurred into gringo.
What I had learned was folk etymology--what Wikipedia calls "A commonly held misunderstanding of the origin of a particular word, a false etymology." Folk etymologies are usually more interesting than the actual word origin. Sometimes folk etymologies can unfairly cast a bad light on some perfectly innocent words, such as picnic, or phrases such as rule of thumb. But for the most part, folk etymologies can be a lot of fun.
One folk etymology (and who knows, maybe it's true), is the story of how American Indians came to call white Americans "Big Knives," or "Long Knives." The term was first applied to Virginians, then to all white Americans. Here's the story: Francis Howard, Fifth Baron Howard of Effingham, and royal governor of Virginia (served 1683-1692) traveled up to New York Colony to treat with the Iroquois tribe. He had brought with him a translator of Dutch origin. In the course of the treaty making, one of the Iroquois wanted to know the meaning of the name Howard. The Dutch translator, thinking of a Dutch word meaning "hanger" (I'm doing this from memory, so I don't remember the exact word), translated it as "big knife." Thus Virginians, and later all white Americans, became Big Knives, or Long Knives.
Most likely, the term came from the swords the Virginians carried. But the mistranslation story is a lot more fun.