'Naff' is an adjective and means 'inferior', 'tatty', 'contemptible' or 'useless'. It certainly became popular after Ronnie Barker used it lot in Porridge, a 70s sitcom from UK. Clement and Frenais, the sitcom's writers, will undoubtedly have used the word as swearing – especially on the BBC – was, in those days, not done. (According to the writers, 'nerk' was similarly invented for the same reason.)
Beautifully, though, the word itself has become rather 'naff'. On April 18th, 1982, The Times newspaper reported that Princess Anne had told “persistent photographers” to “Naff off!” Presumably she had another word in mind but resorted to something much less offensive. I'm not convinced that her admonition was the beginning of the word's descent into 'naffness', but it certainly appears symptomatic of it. Nowadays, it's particularly hard to say the word 'naff' without appearing unduly prudish, or self-consciously 'post-modern'.
Naff has a troublesome history. No-one really seems to know where it comes from. The English Usage site cites Keith Waterhouse, author of Billy Liar: apparently he claims that it comes from UK army personnel who used it as an acronym for “nasty, awful, fuck it”, and so it's along the same lines as 'snafu' and 'fubar'. It could also come from the UK armed forces as a reference to the 'NAAFI' – from the initials of the 'Navy, Army and Air Force Institute': the canteens, where, supposedly, the food was not first rate. This seems less convincing – and not nearly so much fun. Perhaps it's from Australia and stands for 'nasty as fuck'.
Maybe, suggests The Chambers Dictionary, the word comes from 'naf', possibly back-slang for 'fanny' (UK English slang for the female genitalia). Why that should come to mean 'inferior' or 'tatty' is beyond me. It then cautiously advances the proposition that 'naff' could be an acronym for 'not available for fucking': a term for a heterosexual. In polari, the gay 'code' from the 1950s, 'naff' certainly meant just that, and it's a great derivation, but it sounds just too neat and tidy, a little like 'gay' being an acronym for 'good as you' which it certainly doesn't seem to be. And besides, if Keith Waterhouse is sure, then it can't be correct, unless it came into being in two different places at different times.
It's a word primarily associated with those who have the passion to swear, but not the nerve.
The Chambers Dictionary, London, 2003