Eskimo is a term used for a group of people who inhabit the circumpolar region (excluding circumpolar Scandinavia and all but the easternmost portions of Russia) There are two main groups of Eskimo: the Inuit of northern Alaska, Canada and Greenland and the Yupik of western Alaska and the Russian Far East (the latter ones are known as Siberian Yupik or Yuit). The Eskimos are related to the Aleuts who live on the Aleutian Islands in Alaska.
The word Eskimo in English is of uncertain origin, but probably came from a French word, Esquimaux, to English. The name is widely but incorrectly believed to derive from a Cree word sometimes translated as "eaters of raw meat". A few have gone so far as to claim that the Cree, on first encountering the Eskimos, were disgusted by the Eskimo practice of eating meat raw, and so called them, essentially, "sickening humans". Because this folk etymology is so tenacious, many Inuit consider the name "Eskimo" to be derogatory. (Minnie Aodla Freeman – "Life Among the Qallunaat" ISBN 0-88830-164-2)
However, this etymology is generally held to be false by philologists. Some Algonquian languages – particularly Plains Ojibwe – do call Eskimos by names that mean "eaters of raw meat" or similar. However, in the period of the earliest attested French use of the word, these peoples were not in contact with Europeans, nor did the Plains Ojibwa have very much direct contact with the Inuit in pre-colonial times. It is entirely possible that the Ojibwa have adopted words resembling Eskimo by borrowing them from French, and the French word merely sounds like the Ojibwa word for "eaters of raw meat". Furthermore, since Cree people also traditionally consumed raw meat, a pejorative significance based on this etymology seems unlikely.
The Montagnais language does not have vocabulary fitting this etymological analysis. A variety of competing etymologies have been proposed over the years, including the possibility that the name derives from the Montagnais word for the way snowshoes are tied, or as meaning "speaker of a foreign language". Since many Algonquian languages refer to the neighbouring Mi'kmaq people using words that sound very much like eskimo, many researchers have concluded that this the more likely origin of the word. (Mailhot, J. L'étymologie de «Esquimau» revue et corrigée Etudes Inuit/Inuit Studies 2-2:59-70 1978.)
The term "eskimo" is still used in Alaska to refer to the state's Arctic peoples in general, whether or not they are Eskimos culturally or linguistically. For example, while the Yupik people prefer to be called "Yup'ik", they do not generally object to being called "Eskimo", but they do not consider themselves "Inuit". 
Eastern groups (Inuit groups) speak Inuktitut, and western groups (Yup'ik groups) speak Yup'ik, although there is a dialect continuum between the two. Kinship culture also differs east and west, as eastern Inuit lived with cousins of both mother and father, but western Inuit lived in paternal kinship groups.
Among many non-Eskimos, the word "Eskimo" is falling out of use to refer to the Eskimo peoples in favor of the term "Inuit", which leads to much confusion as to the relationship between the Inuit and the Yup'ik. Much of the impetus behind this change probably traces to the books of Farley Mowat, particularly People of the Deer and The Desperate People . However, in Canada at least, a belief in the pejorative etymology of the word was a major factor.