A game at cards not unlike loo, but with this difference—the
winner of one trick has to put in a double stake, the winner of two
tricks a triple stake, and so on. Thus: if six persons are playing, and
the general stake is ls., and A gains three tricks, he gains 6s., and
has to “hand i' the cap” or pool 3s. for the next deal. Suppose A gains
two tricks and B one, then A gains 4s. and B 2s., and A has to stake
3s. and B 2s. for the next deal.
“To the `Mitre Tavern' in Wood Street, a house of the greatest note
in London. Here some of us fell to handicap, a sport I never knew
before, which was very good.” —Pepys: His Diary, Sept. 18th,
in racing, is the adjudging of various weights to horses differing
in age, power, or speed, in order to place them all, as far as
possible, on an equality. If two unequal players challenge each other
at chess, the superior gives up a piece, and this is his handicap. So
called from the ancient game referred to by Pepys. (See
Sweepstakes, Plate-Race, etc.)
The Winner's Handicap.
The winning horses of previous races being pitted together in a
race royal are first handicapped according to their respective merits:
the horse that has won three races has to carry a greater weight than
the horse that has won only two, and this latter more than its
competitor who is winner of a single race only.
Source: Dictionary of Phrase and Fable, E. Cobham Brewer, 1894
More on Handicap from Infoplease: