I first started to notice the terminology searching through early census records. I had to look it up because I'd never heard anyone called that before.
Early in history, (1790 until about 1930) If a slave owner raped or carried on a relationship with a slave & the product of that interaction was a child=the child was considered to be mulatto.
If a slave & a Indian had a child together=that child was considered a mulatto.
The term was not a popular one with black people.It wasn't like being lighter put you in a better place back then. Being lighter meant you weren't excepted by either group. The act of passing for white became popular.
To make matters worse, the practice of skin bleaching also became just as popular. An act that continue even today.
Since I started researching my tree, I've always had a fascination with how fair my mother's family was. (My great grandmother Probie & my grandmother Bessie clearly were not just black women. Both woman reflect clear white or Indian features, but had parents that were classified as black.)
The use of mulatto faded in the 1930 & today the term biracial is all that you will hear.
Mixing races is the norm now, but at one time, it was almost a sin. Everything that I've read speaks about the negativity of this term & it's use. However, similar to other terms used to classify black people, we were forced to use it. Certain census records recorded only 3 races: white, black or mulatto. There was not in between.