Although I had heard the term gabacho before, it had never been directed at me. But don't worry, it wasn't an insult.
I've also heard the term gabachita, which stems from gabacho. I heard this when a waitress I was talking to in Mexico pointed to her friend (another waitress) and told me her co-worker, "la gabachita" spoke really good Spanish. She eventually confessed that her friend wasn't a gabacha, but in fact a Mexicana, and was just pulling my leg.
Ok, at this point I guess I need to get on with it and explain what a gabacho (gabacha) is.
The truth is, you already know what a gabacho is. Gabacho is often used instead of gringo. And gabachita is just a variation of gabacha. You see, the waitress I was speaking with at the bar called her co-worker a gabachita because her co-worker looked more like a a red-blooded American than a Mexican. And that's exactly how the term is used, to refer to Americans, just like gringo.
Bolillo is another term. It's actually a kind of white bread that you can probably find in your local Wal-Mart, and it's used to specifically refer to white Americans.
If you're wondering whether or not the words gabacho, gringo or bilillo are offensive, well, the answer is a definate maybe.
You see, while many Spanish speakers will be familar with these words, who considers what to be offensive various tremendously, so becareful. When in doubt ask. Although I suspect you're not likely to use them as much as you are to hear them.
¡Hasta la próxima!