It is a feature of Border morris and Molly, both of which are largely modern inventions reconstructed from a few fragments. Nevertheless, so far as I am aware, blacking up and other elements of the costume are based on the original traditions.

Some claim this came from Minstrelsy. Minstrelsy was a huge part of popular culture for well over a hundred years and its impact is still felt today (how many people are aware that "Jingle Bells" was a minstrel song?). Minstrel tunes found their way into traditional music, including Cotswold morris. What I find interesting is that despite minstrelsy's massive popularity blacking up is not found more widely. If it was derived from minstrelsy surely it would be more widespread? What seems more likely to me is that elements of minstrelsy attached themselves most readily to those traditions where blacking up was already a feature.

The reason this has become so contentious is that its supporters genuinely believe that the tradition does not have racist origins and cannot understand why people cannot see that they are not caricaturing black people.