Spanish for "Indian", indio is a Spanish colonial term for an inhabitant of the Spanish and Portuguese colonies in both South East Asia and the New World. Possibly because the explorers who first stumbled upon these shores thought they had discovered a new route to India.
Due to the conquistadores' contempt for these peoples, the term indio has been associated with laziness, stupidity, and ignorance. Most Europeans considered most indios sub-human, unable to learn and fit only for manual labor.
Their souls could still be saved of course, which means most contact between indios and the foreigners was via the Catholic Church. The friars still treated them with contempt, but over the centuries, many nuns recruited from the native villages gave birth to mestizos.
The effects of the European perception of indios have transferred, to some degree, to the natives themselves; modern Latin American and Philippine culture still suffer from colonial mentality, where the pale skin, fair hair, and light-colored eyes of their old colonial masters are considered more attractive than their own brown skin, black hair, and dark eyes.