Mudblood is a highly derogatory term for a Muggle-born wizard or witch; that is, individuals with no wizarding relatives. There does not appear to be any difference in the magical power of Muggle-borns compared to those who are pure-blood or half-blood, but those prejudiced against Muggle-borns consider them to be of "lower breeding" or worth, and undeserving of magic. The racial slur implies that the individual has "dirty blood" and is considered extremely offensive. There are apparently other, less commonly used terms with a similar meaning, such as "creature of dirt" It is a really offending term, for people can't help being Muggle-born.