This article is from the alt.usage.english FAQ, by Mark Israel email@example.com with numerous contributions by others.
Scots' preferred adjective for Scotland and for themselves is
"Scots". "Scottish" is also acceptable. But "Scotch" (although
used by Robert Burns and Sir Walter Scott, and still used by some
Americans of Scots descent) is now considered offensive by many
Scots. Certain Scots hold that only three things can be "Scotch":
"Scotch whisky", "Scotch egg", and "Scotch mist". They are not
interested in considering additions to this list, although many
other terms containing "Scotch" can be found in dictionaries.
The term "Scotch tape" (a trademark for clear sticky tape made by
the 3M company, based in Minnesota) was originally a reference to
the stereotype of Scots miserliness. 3M at one time made a tape with
no adhesive along the middle. The tape was intended as a masking
tape for painting cars (masking off areas that you didn't want to
paint), so 3M thought it didn't need a full sticky coating; but
customers were not impressed.