Sometime around the 1850s 'spiffy' started to be used to refer to dapper young men, who strolled along the avenues wearing the latest fashions. Spiffy meant that one was dressed in a particularly fine manner, as judged by one's peers. In England the alternate spivvy might sometimes be used. By the 1870s 'spiffing' had entered the language, used to mean 'excellent'. Spiffiness and spiffily were also created, and used with wild abandon.
Spiffy is still used in its original sense today, particularly when used in the phrase 'all spiffed up'. But while one can certainly look spiffy or wear spiffy clothes, nowadays anything can be spiffy, from a pet rock to a space shuttle. Spiffy implies cool, new, and interesting, and is always positive.
The origins of spiffy are a bit of a mystery. It is first recorded in 1853 in a letter written by Dante Gabriel Rossetti, a pre-Raphaelite artist. On November 2, 1853, he wrote a letter to a fellow painter and member of the Pre-Raphaelite Brotherhood, Ford Madox Brown:
"The frame for my watercolour has just come and it is
spiffy
cheesy
jammy
nobby
stunning
jolly
splendacious
&c &c &c &c."
-- www.npg.org.uk
It is worth noting that 'cheesy' at this time meant 'showy', with none of the negative connotations it has today. The other words also mean Good Things; Mr. Rossetti was quite pleased with his frame. He probably did not create spiffy himself, but we do not know where he got it from. Around this same time the word 'spiff', meaning a 'well-dressed man', was in use, but it is unclear which word came first. Spiff is often credited as being the first on the scene, but as we don't know where it may have come from (most dictionaries say an 'English dialect'), this doesn't help us much.
It may have links to the word 'spiflicate', meaning to confound, overcome completely, or to beat up. Lexicographer Eric Partridge suggests that 'spiff' and related words might be echoic, recollective of the sound of something being struck. 'Spiff' would be the sound of a 'striking' outfit. And finally, in the late 1800s, a 'spiff' was also a commission given by a shopkeeper to a salesman who sold out-of-date or undesirable stock. This may be related to the usage of spiff to mean 'charm'. But all that all this tells us is that the period of 1850 to 1900 was full of spiff, spiffy spiffiness, and spiffily spiffed spiffitude. And much spiflication, of course.