A horse carcass, rendered, had many uses. In the U.S., the meat could end up in the food at a mink ranch or fox farm, or a greyhound race track, or for pet food, or to a pig farm. Bones were ground up for bone meal fertilizer. Hides went to leather and joints processed to make glue for the furniture and paper trades (hence the idea of old horses being sent to the glue factory).
However, in modern usage, especially in Ireland, the word has come to describe both those from lower-class backgrounds who tend to engage in anti-social behaviour, as well as those of an Irish Traveller background. In this sense, the usage of the word "knacker" is akin to the usage of the term "chav" in England and ned in Scotland. Members of the travelling community in Ireland live in what would ordinarily be considered temporary accommodation, such as roadside trailers or caravans.
The word "knacker" was first used in 1812. It is from the Scandinavian word represented by O.N. hnakkur saddle and hnakki "back of the neck".