"aware, up-to-date," first recorded 1908 in "Saturday Evening Post," but said to be underworld slang, of unknown origin. Variously said to have been the name of "a fabulous detective who operated in Cincinnati" [Louis E. Jackson and C.R. Hellyer, "A Vocabulary of Criminal Slang," 1914] or a saloonkeeper in Chicago who "never quite understood what was going on ... (but) thought he did" [American Speech, XVI, 154/1]. Taken up by jazz musicians by 1915. With the rise of hip (adj.) by the 1950s, the use of hep ironically became a clue that the speaker was unaware and not up-to-date.
cry to instigate attacks on Jews in Europe, 1819 in reference to Jewish expulsions by mobs in various German cities in that year (later called the hep-hep riots); perhaps originally the cry of a goatherd, or of a hunter urging on dogs, but popularly said at the time to be acronym of Latin Hierosolyma Est Perdita "Jerusalem is lost," which, as H.E.P., supposedly was emblazoned on the banners of medieval recruiters for the Crusades who drew mobs that subsequently turned on local Jewish populations. That such things happened is true enough, but in the absence of evidence the story about the supposed acronym looks like folk etymology.