For a long time the keffiyeh was working wear. Palestinian farmers and Bedouins wore the white cloth on their heads as protection from the sun.
That changed during the revolt of 1936–1939. Those who rose up often came from the countryside and wore the keffiyeh. In the cities men wore the tarbush, a red felt hat. In 1938 the leaders of the revolt called on people in the cities to swap the tarbush for the keffiyeh. After that you could no longer tell from a man's headwear who came from the countryside.
In the 1960s the keffiyeh became a symbol of the Palestinian movement, much through Yasser Arafat, who almost always wore it in public.
The pattern is usually read like this: the net stands for the fishermen and the sea, the olive leaves for strength and endurance, and the broad lines for the trade routes through Palestine. It is a reading many share, not a written rule.
In Hebron the Hirbawi family still weaves keffiyehs. The factory is often called the last one in Palestine.
Sources: Wikipedia, Palestinian keffiyeh and Middle East Eye, The last keffiyeh factory in Palestine.
The picture: two men wearing the keffiyeh in Beersheba, June 1938. Photo from the Matson Collection, Library of Congress (matpc 18530). No known restrictions on publication.