This article is from the Anime FAQ, by Steve Pearl with numerous contributions by others.
(1) Original meaning: Your house (company, organiztion, etc), used as a polite form of the second person => you
(2) Meaning in early-late 1980's: An extreme fan of anime/manga/sf who lacks communications with other people and usually untidy => nerd, fanboy [Otakus used "otaku" for "you" instead of more common "anata" "anta" and that' what gave them the title of Otaku-Zoku (otaku-race)]
(3) Current Usage: Anyone obssesed or overly interested with any subject <ex.> Car otaku, Gun Otaku, etc... => mania, freak
(2) has VERY negative meaning and (3) still carries negative meaning, unless used between otakus, of course. :-) So use "otaku" to only other anime fans.
On the net, Otaku is usually refered to a big fan of anime and/or manga. For example, I'm an Otaku. :-)
--From a posting by Tonghyun "Vajra" Kim
One other suggestion: Don't call _anyone_ else an otaku unless you know how they feel about the term. Not all anime fans like being called an otaku. I'm one of those who doesn't care to have the word applied to me, though I have no problems with other fans calling themselves otaku.
-- Christina Callahan