One can't live in United States and not come across this term. Even Elvis Presley could not keep himself from crooning :
"As the snow flies
On a cold and gray Chicago mornin'
A poor little baby child is born
In the ghetto
And his mama cries
'cause if there's one thing that she don't need
it's another hungry mouth to feed
In the ghetto..................."
The expression comes from 1516 when the Venetian government made it mandatory for the Jews in Venice to live on the island known as the Ghetto Nuovo (the New Ghetto), which was walled up with only two gates that were locked from sunset to sunrise. Then, when in 1541 visiting Ottoman Jewish merchants complained that they did not have enough room in the ghetto, the government ordered twenty dwellings located across a small canal walled up, joined by a footbridge to the Ghetto Nuovo, and assigned to them. This area was already known as the Ghetto Vecchio (the Old Ghetto), thereby strengthening the association between Jews and the word "ghetto."
Segregated Jewish quarters had existed earlier too, in fact most often Jews chose voluntarily to live close together. But it's only after 1516 that the term "ghetto" came into being. During World War II the term ghetto attained its popularity as Nazis went about setting them up throughout Europe before transporting Jews to concentration camps from ghettos. Today the term has acquired wider (and negative) connotations as it has come to mean an impoverished section of a city where members of any racial group are segregated and perpetuated by economic and social pressures rather than legal and physical measures.
Sources: http://www.answers.com/ , http://www.veniceword.com/news/39/ghetto.html
Pic : The bridge to Ghetto in Venice, sourced from Google Images.