I know how words can become racist but I'm not sure how a word becomes derogatory or politically incorrect. If seems as though once one does, a new term is created to replace it that is not derogatory and is politically acceptable. But those new words and terms often times become derogatory or politically incorrect over time.
For example, the way crippled gave way to handicapped, which gave way to disabled.
The linguistic processes are technically called Taboo (in this case, Taboo words) and Euphemism, which is substituting a non-taboo word for a taboo word, like saying
intead of
The way it happens is that there are always taboos on certain terms and topics in every culture. These taboo words are the healthiest words in the language, because everybody has to know them, in order to avoid saying them.
(If this sounds crazy, that's because it is -- taboos are unconscious, and not really subject to logic. After all, words by themselves have no powers; it's human culture that produces taboos.)
Anyway, people do need to talk about things, even if it's forbidden, so we substitute "safe" terms (like water closet or crapper or toilet or washroom or men's room or bathroom, instead of "place where one shits in private"). These euphemisms have a short half-life, since once the substitution strategy is detected, the euphemism gradually becomes taboo itself, and is replaced by another euphemism, while the original taboo term goes on forever.
Derogatory, politically (in)correct, profane, vulgar, racist, sexist, and other terms that are applied to language chunks are simply descriptions of the variety of taboo that the terms in question are said to be breaking. They're not categories of words so much as social infractions, which is (luckily) not a matter of grammar.
