The etymology of the word Heathen comes from a Gothic word meaning “person of the Heath” or “dwelling in the Heath” and is similar to the Latin word paganus from which we get Pagan. It evolved to refer to anyone who had not been converted to Christianity and was often used as an insult to mean that someone is barbarous, uncivilized, undisciplined and is often used as a synonym for Pagan as both words have been used in translations of the Bible in place of the word “Gentile”.
The word has been embraced, however by modern followers of certain Northern and Western European religious traditions, including reconstructionist traditions based on the pre-Christian religions of aboriginal Norse, Germanic, Anglo-Saxon and sometimes Celtic tribal, seafaring, agricultural and herding peoples. These religions are often collectively termed heathenry and include some forms of Druidry, Odinism, Forn Sed, Theodism, Asatru, and others.
Modern Heathens and Pagans often distinguish themselves from one another, though some folks in the community will use the words interchangeably. However, the term Pagan casts a much broader umbrella than the word Heathen. Heathens, for the most part, are polytheistic reconstructionists of specifically Northern European ethnic religion and often reject mystical, new age and occult approaches popular among many other Pagan paths.