This brilliant essay on the website Native Appropriations breaks it down nicely.
Explains blogger Adrienne K., "The image of a warbonnet and warpaint wearing Indian is one that has been created and perpetuated by Hollywood and only bears minimal resemblance to traditional regalia of Plains tribes. It furthers the stereotype that Native peoples are one monolithic culture, when in fact there are 500+ distinct tribes with their own cultures. It also places Native people in the historic past, as something that cannot exist in modern society. We don't walk around in ceremonial attire everyday, but we still exist and are still Native."
And also, says Adrienne, "“Playing Indian” has a long history in the United States, all the way back to those original tea partiers in Boston, and in no way is it better than minstral shows or dressing up in blackface. You are pretending to be a race that you are not, and are drawing upon stereotypes to do so. "