Historically, dude originally meant "old rags" - a "dudesman" was a scarecrow. In the late 1800s, a "dude" was akin to a "dandy," a meticulously dressed man, especially out West. It became "cool" in the 1930s and 1940s, according to Kiesling. Dude began its rise in the teenage lexicon with the 1981 movie "Fast Times at Ridgemont High."
Thanks to PhysOrg.com for the pointer.