Pilots often learn to use the word "wilco" on the radio through contextual interpretation. During my experience as a pilot communicating on the radio I have often observed pilots using the word "wilco" improperly. What is the true meaning of the word "wilco" and what is its origin?
"Wilco" is short for the phrase "will comply," meaning that the speaker will follow the instructions to which they are replying. Merriam-Webster places the origin at 1938, some time after the invention of radio, likely in military usage.
In the US, the "official" meaning is in the Pilot/Controller Glossary:
WILCO − I have received your message, understand it, and will comply with it
(Note that this is slightly different from roger, which is just an acknowledgement and doesn't mean that you will comply with anything.)
The AIM 4-2-3 mentions using it to acknowledge instructions:
Acknowledge with your aircraft identification, either at the beginning or at the end of your transmission, and one of the words “Wilco,” “Roger,” “Affirmative,” “Negative,” or other appropriate remarks
The problem I see with using wilco is that you're confirming that you'll comply with an instruction, but if you don't also read back the instruction then the controller has no way to know what you're complying with. You might have misheard or misunderstood it, so you should repeat it. But if you repeat it, then wilco is unnecessary. Outside the US, I was originally taught never to use roger or wilco for that reason: it leaves the controller wondering what you really heard and what you're going to do next. But obviously as far as US aviation goes, both are completely acceptable.
And as for the etymology, that's already been covered in another answer:
"Wilco" is short for the phrase "will comply," meaning that the speaker will follow the instructions to which they are replying
I have been a pilot for 47 years. The use of the word WILCO vs. reading back a clearance is defined. Keep in mind that early radios were not easy to understand and the phonetic alphabet was formed. An ATC instruction "Plan on crossing XXXXX at FL280" can be addressed as WILCO as it is not a clearance. "Cross XXXXX at FL280" is a clearance and must be read back.
As other answers have already mentioned, WILCO is a concatenation of Will Comply. To provide a UK perspective, there are a number of ATC instructions that must be read back, however in other cases "Wilco" is preferred. The CAA Radiotelephony Manual CAP 413 states (my emphasis):
"Instructions transmitted are to be complied with and, in most cases, should be read back to reduce the chance of any ambiguity or misunderstanding, e.g. ‘G-ABCD, taxi to the apron via taxiway Charlie’. Chapter 2 specifies those instructions that are to be read back in full. However, if the instruction is short, clear and unambiguous, acknowledgment of the instruction using standard phraseology such as ‘Roger’ (I have received all your last transmission) or Wilco’ (I understand your message and will comply with it) is preferred for the sake of brevity in the use of radiotelephony transmission time."
Based on the rather strong opinions of a CAA examiner, the following scenarios illustrate an example of acknowledging instructions to report position:
G-ABCD, report abeam Farmoor reservoir"
If a read-back is given in the response and it is clipped, the controller could hear "... Abeam Farmoor reservoir G-ABCD", which could cause confusion. Acknowledging with "Wilco G-ABCD", "Roger G-ABCD" or even just "G-ABCD" reduce the risk of confusion if the response is clipped, as well as providing brevity.
G-ABCD, number 2 in circuit, report final
In this scenario, again a clipped read-back could cause confusion ("... Final G-ABCD"). However, "Roger G-ABCD" (or just "G-ABCD") simply mean the transmission has been received. This could refer to the traffic information, the instruction, or both. The instruction could perhaps have been missed, especially as part of a more lengthy and complicated transmission.
In both scenarios, "Wilco" is the only response that unambiguously conveys that the instruction element of the transmission has been received and understood, and that it will be acted upon. It is for this reason that it is preferred over "Roger" when a brief acknowledgement is desirable.