Just read Stuart Maconie's attempts to explain it in 'Pies & Prejudice'...for those that haven't read it....
"In the language of the Scouser, people from Wigan, and for that matter Bolton, Oldham or Bury, are woollybacks. In fact, I tend to think that woollyback is really just an imperious racial generalisation, like those ex-colonels who think it's all wogs after Calais....I think most Scousers secretly think of Milanese fashion designers and Bantu tribesmen as woollybacks, united in their tragic non-Scouseness. If you want to be specific though, "woollyback" means those sooty Lancashire textile towns to the east and north of Liverpool. Wigan is the crucible of all things woollyback."
Don't take his word for it though...he's a wool.
Just to complicate things, he rambles on about "plazzies" as well....
"A plastic Scouser is what the real Scouser and the woollyback alike call one of the despised breed of chavscallies from those west Lancashire towns....a distinctive tribe identifiable for their penchant for Rockport, Henri Lloyd and Lacoste and for the stylistic quirk of wearing their tracksuit bottoms tucked into their socks....Scousers hate plazzies because they aren't real Scousers but cheap wannabees with no style. Sadly, there is no such thing as a plastic woollyback, i.e. a Scouser who says 'alreet cock' and 'ey up' and hopes to be taken for a Wiganer".