How We Use It
As a buzz term to protest against giving money to faceless strangers abroad. Google the phrase and you find a bunch of pundits and columnists all using it the same way: "Sure, some foreign country may have just been leveled by an earthquake or an exploding volcano, but there are starving people right here. We should fix the problems in our own country first -- after all, charity begins at home."
What It Originally Meant
"You should absolutely give money to those war-torn tsunami orphans, and the first step to doing so is to not be a douchebag."
"Charity begins at home" is one of those obnoxious phrases that people use to alleviate their guilt about never actually being charitable. But they are, of course, using the word "charity" in the sense that it's most commonly used today -- giving money or aid to poor people. When the phrase "charity begins at home" was first coined, the definition of "charity" was a little different. From Roman times up until recently, "charity" wasn't necessarily about giving alms. It was more of a state of mind, a mentality of kindness and benevolence. You know this if you've read a Bible, by the way -- the word for "charity" and the more general "love" are both translated from the same Greek word, "agape."
The point being, when people first started saying "charity begins at home," what they were trying to get across was that being a loving person in the home leads to being a loving person out in the world. In other words, it served as an instruction about how to be more generous, which is kind of the opposite of the way it's used today as a warning against being too generous. Or, as other experts have pointed out, only an asshole could hear "charity begins at home" and interpret it to mean that it also ends there.
http://www.cracked.com/article_20251_the-5-most-frequently-misused-proverbs_p2.html