Most people when referring to the munchkin in a deregatory sense mean someone who not only powergames / rollplays, but who does so in an egotistical way, trying to outshine the other players and continually trying to 'outdo' other players' PC's in terms of power at the cost of in-game fun and to the detriment of the overall story. Examples of this are to kill any monster / NPC for XP, even though the nature of the game is such that they could have interesting information or make for great roleplaying moments in the game. To the munchkin these issues are less important then gaining more XP.
Thus, as I see it, powergaming as such and roll-playing as such are not bad things in and of themselves, as long as all players are having fun, and the powergamer and/or roll-players leave those who play a (slightly) different style in their own value. A real munchkin however, will put his/her own pleasure at attaining power over and above the fun of others, hence the vilifying use of the term.
This is as I understand how the term should be used.