Wikipedia is not informative on why/where it is considered offensive.
The sad thing is, even in Canada many people don't realize how hurtful the "eskimo" epithet can be. To help spread awareness of the issue, I'm planning on partnering with my friend Dan Snyder to launch a public outreach program by buying the offensively ungrammatical Toronto Maple Leafs and rechristening them the Eskimos. Before every ice-hockey bout, we'll have a bunch of skating clowns attired in traditional garb and armed with harpoons chase down our mascot, Eskimodo the humpbacked whale, which should not only produce a most satisfactory comic effect, but serve to educate the mouth-breathing yokels who attend such spectacles on a part of their country's culture they're usually too soused on Moosebraü and overblown Canadian jingoism to pay the slightest mind to.
As part of this effort, if you wish to attend and can prove native descent, we'll be happy to give you a "reservation" free of charge, even at the last minute, although each of these seats will actually be a single square-foot of standing room located in the offsite parking-lot.