I believe, in the earlier days of the recording industry, if a singer had a hit with a song, another label would have the same song "covered" by a singer from their own stable of performers so there would be a version on their label.
And there was a more a more sinister version as well: a song made popular by a black singer would be "covered" by a Caucasian singer so as to make it acceptable to white record-buyers.
And, McGrath, I'm afraid I've seen the term used in folk music magazines. It sets my teeth on edge. It flies in the face of what traditional music is all about.