Why did Snape call Lily a 'Mudblood'?

[Jen Reese]

No: HPFGUIDX 177553

Wow, it's a slow list day! I've got a question for a slow day: why 
*did* Snape call Lily a Mudblood?  Also, I'm curious how others read 
Snape's Worst Memory given his new memories in DH.  Did the resolution 
work for you?  I'm on the fence about this part.

Jen, playing kid chauffeur at the moment, waiting for a b-day party to 
finish.