The term NAZI is an abreviation which is derived from the term National Socialism. Adherents of Nazism held that the Aryan race were superior to other races, and they promoted Germanic racial supremacy and a strong, centrally governed state.
Originally, Nazi was invented by analogy to Sozi (a common and slightly pejorative term for the Nazis' main opponents, the socialists in Germany). The Nazis from the era of the Third Reich rarely referred to themselves as "Nazis", preferring the official term "National Socialists" instead. Nazi was most commonly used as a pejorative term; however, its use became so widespread that, currently, some Neo-Nazis also use it to describe themselves.
Nazism has been outlawed in modern Germany, yet small remnants and revivalists, known as "Neo-Nazis", continue to operate in Germany and abroad.
But if you ask me, NAZI is just short for better words like a s s hole, dumbass, and idiot. :)