The word in German actually means 'ornament'; however, in the Europeanised version of Hebrew (which is a 7-letter word beginning with 'y' and ending in 'ish' with an 'idd' in between that one is not allowed to use on AnswerBank) it took on the meaning of 'penis'. From that - like many words for 'penis'! - it came to mean a stupid or obnoxious person.
QM is correct about the y1ddish meaning... I thought the German meaning was "jewel" or "jewelry" - all the jewelry stores in Germany have the word Schmuck on them (which I found incredibly funny as a teenage visitor).
By the way, y1ddish and German are very similar (y1ddish is a combination of German, Hebrew, and a couple of other languages) so I always thought the German meaning of the word must have some connection to the y1ddish - Bohne, maybe you could answer that one... is Schmuck in German a euphemism for penis?
An answer for Mrs Cheeks, its not that the editors are anti semitic but that word shortened to the first three letters has been used as a negative term for a jewish person. I suppose that's why they have banned it.