Chicago-land TV clown. Bright red hair, big shoes, Bozo buckets. Always led that Grand Parade at the end of the shoe, though Cookie tried to steal the scepter or otherwise trick Bozo into letting him do it. To be in the studio audience, there was a slight (six year?) wait...

Wentworth and Flexner's Dictionary of American Slang lists "bozo" as:

A man, fellow, guy; esp. a large, rough man or one with more brawn than brains. 1934: "Drive the heap, bozo" -- Chandler, Finger Man. From Spanish dialect "boso" (from "vosotros") - you (pl.) which resembles a direct address."

For those not fluent in Spanish, "vosotros" is pronounced (approximately) "Bozotrose," and means basically the same thing as the American Southern "y'all". Other sources (Webster's, various versions) list it as coming from the Spanish "bozal," meaning "fellow." A cute pun, if true; that would make a "bozo" not only a dude, fellow, or whatever, but also "y'all" in its singular.

Those familiar with Firesign Theatre will probably know their definition, as well; to be a Bozo is to participate in one of the Five Lifestyles of Man. Here, excerpted from the same, is their (clearly superior?) definition of a "bozo":

B.O.Z.O. is the Brotherhood of Zips and Others. Bozos are people who band together for fun and profit. They have no jobs. Anybody who goes on a tour is a Bozo. Why does a Bozo cross the street? Because there's a Bozo on the other side. It comes from the phrase vosotros, meaning others. They're the huge, fat, middle waist. The archetype is an Irish drunk clown with red hair and nose, and pale skin. Fields, William Bendix. Everybody tends to drift towards Bozoness. It has Oz in it. They mean well. They're straight-looking except they've got inflatable shoes. They like their comforts. The Bozos have learned to enjoy their free time, which is all the time.

Clearly a backronym with a bit of artistic license, and a little bit more stereotype than productive discourse... but then, if you can't joke about the meaning of Bozo, what can you joke about?

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