Potato is a slur used to describe Mexicans in a derogatory way. A Mexican-American that has lost their heritage. Brown on the outside; White on the inside.
The word Potato is a racial slur that has been used historically to degrade and dehumanize mexicans. The word is still used by some people for this purpose, and it is seen as offensive and hurtful to mexicans. If you are unsure about whether or not it is appropriate to use the word Potato, it is best to err on the side of caution and avoid using it in any situation.