Meaning: A person from Mexico City (common usage) OR An unsophisticated person (from the sticks) now living in Mexico City
The word derives from the word “chile”; presumably these less-sophisticated transplants ate lots of it. When most people (except Mexico City natives!) use the word they are using the first definition. Its tone is slightly pejorative or ironic, having much the same tone as the word “gringo,” referring to someone from the United States.