Charles linked to it in his post, but I thought we should have the full quote in context up on Slog:

This is how Republican Vice Presidential nominee Sarah Palin described Barack Obamas win over Hillary Clinton to political colleagues in a restaurant a few days after Obama locked up the Democratic Party presidential nomination.

According to Lucille, the waitress serving her table at the time and who asked that her last name not be used, Gov. Palin was eating lunch with five or six people when the subject of the Democrats primary battle came up. The governor, seemingly not caring that people at nearby tables would likely hear her, uttered the slur and then laughed loudly as her meal mates joined in appreciatively.