Actually, there is no official consensus on what the word �pagan�
means. To some it implies any religion outside the confines of the Judeo-Christian
beliefs. Other define it as any duo or polytheistic religion. However, there is
some general agreement about the origins of the word. The term pagan comes from
the Latin word �paganus.� Most modern sources interpret the word to
have meant the equivalent of �country bumpkin� or �hick.�
Christians used the term to make fun of the country folk who held onto the old
traditions and refused to accept Christianity. They considered paganism to be
backwards and outdated. The implication was that pagans were outsiders and not
intelligent.
By the end of the third century, the term pagan evolved to include all of the
non-Christians. Then it became a word that meant evil and associated with the
worship or Satan. This is the most common understanding of the term today by
those in the Christian faith.
Of course, to those of us who know the truth pagans and paganism means something
entirely different. This is called a �skunk word� because it has
varied meanings depending on whom you are talking to. For example, the words
heaven and hell means different things to different people. This is not technically
a bad thing, but its not a good thing either. When I refer to myself as Pagan,
depending on what people believe the word to mean I can be anything from a friend
to a mortal enemy. Instead of discovering the truth about the word Pagan, and
what Pagans are some people choose instead to use it as a nasty label.
Many Wiccans, Neopagans and others in the alternative religious movement refer
to themselves as Pagans. I freely use the term to describe all of those involved
in nature worship, whether they are Wiccans, traditional witches, neopagans,
Goddess worshippers or other non-mainstream religious folk.

To expound ad nauseum on Rose Ariadne’s explanation of the actual origin
Initially, many people lived too far out from a central point of worship to pay homage there regularly. They built their own altars and shrines in courtyards and fields near their home; these sacred spaces were then utilized by the local villagers… or even single families/individuals… dependent on just how isolated the location was. The word ‘pagus’ — meaning a country district (including country towns and villages) was used in reference to these folks, as opposed to ‘urbus’ (origin of ‘urban’), which meant the bigger cities.
There are a few pre-christian uses of ‘paganus’, usually used to mean the person was closely tied to the local customs of the place he or she was from. Pre-christian religion often was very locally focused — it was the divine presence in one’s home that made it one’s home, and worship through local customs was the same as loyalty to one’s home. So ‘pagani’ was sometimes used to mean ‘devoted to the local ways’, in a complementary sense. It often also meant ‘hick’ in the sense of being local or rural, not cosmopolitan.
Christians took up the meaning of “loyal to the old ways” — as did Roman vernacular — as christianity became more popular in the empire. By the 3rd or 4th century, ‘Pagan’ was used in the western empire, and ‘Hellene’ was commonly used in the eastern empire — both used to refer to those who held to the pre-christian religions. Not much later, it was pressed into use in a derogatory sense.
Christian scripture plainly refers to the worship of the Old Gods as demon-worship. The roman culture had many old tales about dangerous night-time cults that became welded to memories of the public rites of the Old Ways. On the other hand, the older religions really _had_ been full of divination and magical arts, which were then considered science, but which were forbidden by the new Christian church as it gained authority.
‘Pagan’ has been a term for traditional pre-christian religion pretty much from the earliest uses we can find.