Consulting Dictionary.com reveals something interesting. Look at the first meaning listed: "favorable to progress or reform, as in political or religious affairs." That does not seem all that horrible, does it? Look at the third meaning: "of, pertaining to, based on, or advocating liberalism, especially the freedom of the individual and governmental guarantees of individual rights and liberties." Again, that doesn't sound bad at all.
In fact, none of the definitions listed seem like they could be objectionable, even to conservatives, except perhaps for #2 and #7. #2 says, "noting or pertaining to a political party advocating measures of progressive political reform." Perhaps some conservatives are equating "liberal" with a political party they do not like and cannot get past that. #7 says, "free from prejudice or bigotry; tolerant." Perhaps some religious conservatives take issue with this because they prefer bigotry. Most of the other definitions emphasize individual rights and freedom, neither of which seems like it would be controversial.
So why has "liberal" become an insult? I suspect that the answer lies at least partially in religion. Bertrand Russell shed some light on the subject with the following quote from Unpopular Essays:
The essence of the liberal outlook lies not in what opinions are held but in how they are held: instead of being held dogmatically, they are held tentatively, and with a consciousness that new evidence may at any moment lead to their abandonment. This is the way opinions are held in science, as opposed to the way in which they are held in theology.The willingness to base one's opinions on evidence rather than dogma is antithetical to religion. The opposition to liberalism makes a little more sense now, at least it does to the degree that conservative politicians and their fans are religiously inclined. For those who prefer religious dogma to reason, there is good reason to oppose liberalism.
Of course, it must also be acknowledged that the meaning of liberal has changed over time so that much of modern liberalism has become every bit as dogmatic and authoritarian as religion. There are plenty of valid reasons to reject this sort of liberalism, and a growing number of us on both the political left and the political right are beginning to do so. Freethought is not only antithetical to religious dogma; it is also antithetical to the contemporary dogmatic and authoritarian form of liberalism.