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It pretty much means "white person". It doesn't necessarily mean caucasion. If you're Mexican with light skin you may be nicknamed "Güero" for a boy, or "Güera" for a girl. If you have Spanish speaking friends and they say something like "hey güero" it means like "whats up white buddy". If there's some Spanish speaking person that doesn't like you or any white people and says something like "I hate that pinche güero" it may be used as a rude and possibly racist way. Güero isn't a racist or bad word at all, as long as you say it with a positive tone and you dont sound like a jerk.
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