Could someone tell me the origins of the word 'coon' and how racist it is?

It is extremely racist. Coon is short for raccoon, and became a racial epithet because of its dark color and the fact that the animal was typical prey for hunters and their dogs. In the bad old days of lynchings, when Southern white men would say they were going coon hunting, it was often code for saying they were going out looking for African Americans to beat up, torture, and/or kill.