Initially a simple abbreviation, the word 'Paki' acquired offensive connotations in the Sixties when it was widely used as a derogatory term to insult immigrants from across the Indian subcontinent.
So says the Daily Mail which covers the story of Prince Harry - a low-ranking member of the royal family, apparently - using the term to describe an Asian soldier during his training. He's got a track record in this kind of sensitive behaviour too, dressing up as a nazi soldier a few years ago at a fancy dress party.
So, harmless light-hearted banter or imbecilic racist rubbish?
For more on the p-word and its linguistic history, have a look here , here and here