It's inseparably tied to deviantart, tumblr, and all the sonic/anime/game fan characters that infest those places. When Stan Lee created Spiderman, he didn't tell everybody to check out his "OC". They're CHARACTERS. There's no reason to emphasize the originality of a character unless you're insecure about how you stole the design from somewhere else. I can't design a character anymore without feeling like some tumblr reject drawing a sonic fan character. It's ruining my good times.
Also there's this egotistical slant on the whole concept where your OC is supposed to represent yourself. Your OC is much cooler looking, more talented, and more attractive than you. It's weird and depressing seeing all these kids pretending to be fictional characters rather than just being themselves. I feel like this is a precursor to the matrix where everyone is an avatar instead of a human being.
The real intention of the term "OC" is primarily used for roleplay purposes. It's easier to type than "character" and doesn't look as dumb as just "C". It also distinguishes between a roleplay character that was ripped out of existing fiction, and something actually original. Sure, you could just say "RPC" but then that implies that the character will only ever be used for roleplaying.
Unfortunately, places like dA/Tumblr basically turned this into "fan character for an existing fictional universe" because they're stuff at writing original ideas.
I don't get the whole "your OC is supposed to represent yourself" thing. I see people making characters like this and it boggles my mind. Characters are supposed to be an escape from yourself, not an attempt at trying to make yourself look better to a bunch of people on the internet. And definitely not something to fill your desire to insert yourself into some game/show/etc's universe, where you definitely don't belong.
Though I do typically just say character personally.
